Dr Ernest Addison  — Governor of the Bank of Ghana
Dr Ernest Addison — Governor of the Bank of Ghana

Governor defends central bank’s decision to finance government expenditure

The Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has defended the central bank’s decision to finance government expenditure last year.

He said the economy would have been destabilised and come to a standstill had the BoG not stepped in to support the government.


Speaking at the SIGA annual stakeholder meeting in Kwahu Abetifi in the Eastern Region yesterday, Dr Addison said: “We need to remember where we are coming from at the beginning of 2022 when we lost access to the capital market.”

“This is a government that had access to the capital market for at least $3 billion each year, but we started 2022 with the downgrading of the economy and, therefore, the source of financing was not available.

“In addition to that, the revenue measures were not working, with the revenue projections performing below targets.”

“All those meant that government finances were in trouble, as expenditures needed to be funded, but there was no money,” he said.

He said the central bank, therefore, had to step in to help the country go through those difficult times.

“It is important to recognise that we could have gone into this crisis much earlier than we went; if the BoG hadn’t stepped in, investors in government bonds were not going to be paid the interest,” he said.

The central bank has come under pressure in recent times over its decision to support the government’s budget in 2022, with some describing the decision as reckless.

On a net basis, the BoG last year financed the government to the tune GH¢44.5 billion.

The Governor said the situation of the central bank financing the government, however, became unsustainable by the middle of 2022, hence the decision of the government to approach the International Monetary Fund (IMF) for support.

He said even the technical team from the IMF recognised that the central bank needed to keep the system stable and the economy going.

“They admitted that the financing from the central bank was needed until we had a plan. We have been discussing this plan with the IMF over the last three to six months and finally had a staff-level agreement in December,” he said.

Dr Addison said the plan involved the fiscal consolidation plan, as one leg, and the debt restructuring currently underway, as the second.

“So when people speak as if we have been reckless, I disagree completely,” he insisted.

Plans of the IMF programme

Dr Addison noted that one of the key plans with the IMF was to ensure that the revenue and the expenditure plan that was implemented in 2023 would not require central bank financing.

He said that would make the central bank’s interest rate policy more effective.

He said the plan also included a structural policy, adding that that was where state-owned enterprises came in.

“It is important that SOEs are competitive and efficient and it is expected that we will have a policy which will state clearly what the objectives and guiding principles of state ownership will be,” the Governor said.

“It must also state clearly what the roles and responsibilities of the shareholder or the management of SOEs will be.

“The policy should also specify what the fiscal relations between the government and SOEs are, including the financing of SOEs and dividend payments,” he added.


He said the policy must also provide a framework for the remuneration of board members and the executive management of SOEs and also a framework for the appointment of board members, as well as executive management, based on their technical competence.

Dr Addison said the policy must also place a cap on the salary adjustment of SOEs.

He said all of those were being discussed and were part of the issues under the IMF programme.

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