Zero budget financing  impacts reserve money — BoG annual report
Dr Ernest Addison — BoG Governor

Zero budget financing impacts reserve money — BoG annual report

The implementation of the zero financing of the budget by the Bank of Ghana, coupled with the effect of the implementation of the Domestic Debt Exchange Programme (DDEP) and sustained sterilisation of excess liquidity has contributed to the decline in reserve money.


The annual growth in reserve money slowed considerably to 29.2% in December 2023, from 57.5% recorded in the corresponding period of 2022 according to the bank of Ghana (BoG) annual report for last year. 

Reserve money is the holdings of currencies, precious metals, and other highly liquid assets used to redeem national currencies and bank deposits and to meet current and near-term financial obligations by a country's central bank, government treasury, or other monetary authority

The bank of also reported that the Net Domestic Assets (NDA) grew by negative 1.1% in the year under review, compared to a growth of 144.6% the previous year. 

In contrast, NetForeign Assets (NFA) of the central bank expanded by 119.2% in December 2023 relative to 312.1% contraction, recorded in 2022.

The net build-up in foreign assets, the bank said was largely driven by inflows from the Gold for Reserve Programme, forex purchases, and proceeds from the International Monetary Fund Extended Credit Facility (IMF ECF).

Broad Money Supply

Developments in monetary aggregates for December 2023 showed a significant increase in broad money supply including foreign currency deposits (M2+), relative to December 2022. 

Broad money is a category for measuring the amount of money circulating in an economy.

The report said M2+ increased by 38.7%, year- on-year, in December 2023, relative to 33.0% in December 2022. 

The growth in M2+ was driven mainly by expansion in NFA, which went up by 303.8% in December 2023, compared to a contraction of 237.0% a year earlier.

Deposit Money Banks' Credit

Growth in total nominal outstanding credit extended by Deposit Money Banks (DMBs) decreased to 10.0% in December 2023, down from 30.2% in December 2022. 

At end-December 2023, total outstanding credit stood at GH¢77.0 billion, compared to GH¢70.0 billion in 2022. In real terms, total outstanding bank credit contracted by 10.7% in December 2023, compared with a contraction of 15.5% in December 2022.

Private sector credit

The bank reported that growth in credit to the private sector decreased in both nominal and real terms at the end of December 2023, reflecting tight monetary policy stance, challenging macroeconomic conditions, and the impact of the DDEP. 

Growth in nominal credit to the private sector slowed to 10.7% in December 2023, compared with 31.8% in 2022.

The outstanding credit to the private sector in the review year stood at GH¢70.56 billion, compared with GH¢63.75 billion the previous year. In real terms, the annual growth of outstanding credit to the private sector was negative 10.2% in December 2023, compared with a growth of 14.5% in December 2022.

Stock market performance

The Ghana Stock Exchange Composite Index (GSE-CI), a statistical tool that groups together many different equities, securities, or indexes in order to create a representation of overall market or sector performance, closed at 3,130.23 points in 2023.

This represents an annual growth of 28.1%. 

The improved performance of the GSE-CI reflected increased demand for equities during the review year according to the report. 

It said the main sectors that contributed to the gain recorded by the GSE-CI were the food and beverages, manufacturing, distribution and agriculture sectors.

However, the report also noted that the GSE-Financial Stocks Index (GSE-FSI), a sub-component of the GSE-CI, closed the year at 1,901.57 points, reflecting a loss of 7.4 per cent, compared to a loss of 4.6 per cent, over the same comparative period. 

Market capitalisation increased by 14.5% to GH¢73.89 billion, compared with GH¢64.51 billion in 2022.


Bond market

Regarding the bond market, the report indicated that the total value of Government of Ghana Notes and Bonds listed on the Ghana Fix Income Market (GFIM) at end of December 2023 stood at GH¢308.96 billion.

This is compared to GH¢160.29 billion in the corresponding period in 2022.

The total value of corporate bonds stood at GH¢9.67 billion at end-December 2023, compared with GH¢11.77 billion at the end of December 2022. 

According to the report, the cumulative volume of trades in 2023 stood at 98.44 billion, valued at GH¢80.0 billion, compared to volume and value of trades of 230.32 billion and GH¢220.76 billion, respectively, in 2022 and 2023.


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