The Bank of Ghana (BoG) has once again defended its decision to fund the budget after COVID-19, arguing that failure to do so would have been disastrous for the country’s economy.
Before COVID-19 came along, the Central Bank had a policy of not funding the budget from 2015 to 2020. But things changed suddenly after COVID-19, when the government started having trouble bringing in sufficient funds.
Dr. Philip Abradu-Otoo, director of research at the Bank of Ghana, stated this during the University of Ghana’s 75th anniversary public lecture, “Ghana’s Economic: The Need for Paradigm Shift.”
“So the Central Bank’s point of view, we realised we needed an economy to protect. So there were choices that had to be made, should we allow the economy to collapse or we should stick strictly to issues of fiscal dominance and then who picks up the pieces after the economy has collapsed”. Dr Abradu-Otoo stated.
“But that financing that we did in 2022 went mainly to deal with investors; domestic investors whose bonds had matured and government needed to pay these bonds and for which government had no resources”, he explained further.
“Hundred per cent of that amount [BoG financing] was due to domestic bonds that had matured for which we had to step in to save these domestic investors. And that is where this fiscal dominance issue came in. So yes, it came in but we did that to save domestic investors”, he added.
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