According to the central bank, an allegation made by the Member of Parliament (MP) for Bolgatanga Central, Isaac Adongo, on November 8, 2022 that the bank had financed the government to that amount, was unfounded, and only meant to impugn “the hard-won credibility of the Bank of Ghana and its management.”

A press statement issued by the BoG last Friday produced figures to explain the evolution of government accounts at the bank.

In addition, the bank explained the key components making up its overall claims on government.

Claims on government

The BoG said at the end of December 2020, the claims on government stock position stood at GH¢34.1 billion and included GH¢10 billion COVID-19 Bond, purchased by the bank.

“It would be recalled that in 2020, a request was made by the government, through the Minister of Finance, to suspend the Fiscal Responsibility Act due to the COVID-19 pandemic.

“This was approved by Parliament, together with the trigger of Section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended, and paved the way for the government to issue a COVID-19 Bond which was purchased by the Bank of Ghana at the policy rate, with moratorium of two years,” the statement said.

It added that at the end of December 2021, claims on the government rose to GH¢34.8 billion, and had recently risen further to GH¢40.2 billion at the end of October 2022, reflecting an increase of GH¢5.3 billion in 2022, which was the result of premature unwinding of positions held by some banks.

On-lending claims

These included recent resources from the Extended Credit Facility (ECF) programme with Ghana and the Rapid Credit Facility (RCF) that was provided during the COVID-19 pandemic, which were on-lent to the government.

“These are denominated in US dollars and revalued in line with exchange changes. These claims have increased by an amount of GH¢17.8 billion from the beginning of the year to October 2022.

“This reflects a revaluation of these claims in the Bank of Ghana’s books to account for exchange rate developments. This figure does not reflect Bank of Ghana’s lending to the government but rather resources from the IMF that were required to be passed on to government in line with approvals by the IMF Board. And the increase in the amount in 2022 does not reflect new cash transactions but rather merely a book-entry figure, driven, in large part, by the depreciation of the currency,” the BoG stated.

Government overdraft

Furthermore, the BoG said the devastating after-effects of the pandemic worsened the fiscal position in 2021, as government struggled to meet revenue targets to help with budget implementation.

“Even though there were intermittent short-term liquidity extension by the bank, consistent with the law to enable the government to fund its expenditures, the government fully paid back its indebtedness to the Bank of Ghana by the end of 2021.

“This support is temporary and consistent with crisis management as we work with the International Monetary Fund to design a debt operation that will lift the burden of debt servicing off the budget. The central bank has been transparent on these issues,” it stated.

Refinance

On claims by Mr Adongo that the BoG had illegally borrowed $7 billion through bridge financing, swaps and repurchase agreements, among others, and, therefore, the bank was seeking funds to refinance that amount, the statement said, “ swaps, repurchase agreements and sale buy back transactions are legitimate operations conducted by all central banks for effective foreign exchange reserves management.”

It added: “ Bank of Ghana has deployed these instruments since 2011 for foreign exchange liquidity management purposes. It is an important instrument for foreign exchange management by all central banks, as part of its treasury and reserve management functions. “

The bank said global developments had resulted in tight financing conditions and those swaps had served as a significant source of foreign exchange liquidity for the economy.

“The total outstanding swaps, repurchase agreements and sale and buy back transactions stood at $2.4 billion at end October 2022, of which only $720 million is expected to mature by the close of the year,” it stated.