The Bank of Ghana (BOG) has denied printing GH¢22.04 billion, saying the amount represents net claims on Government, and not new currency printed to support the Government’s budget.
In a statement in reaction to allegations by the Minority Ranking Member on the Finance Committee in Parliament that BOG had printed an amount of GH¢22.04 billion to finance the Government’s budget without parliamentary approval.
According to the Bank, the net claims have a component of GoG Stocks and bonds sold by commercial banks under repurchase agreements; IMF SDR allocation disbursed to Government through the Bank of Ghana; Draw-down of the Government’s own deposits and the negative balance on the Government’s account with the Bank of Ghana at a point in time.
In a statement issued by the Central Bank, it explained that bonds, held by a commercial bank since 2021 were purchased by BoG to provide liquidity to the bank, under a repurchase agreement that required the bank to buy back these bonds at a later date.
“Having purchased these bonds on the secondary market as a secondary transaction, Bank of Ghana’s holdings of GoG bonds increased by GH¢1.6 billion, not because it had lent money to Government, but because it had purchased a GoG bond originally purchased by the bank for investment purposes” it stated.
It noted that it routinely entered into similar agreements (Repos and Reverse Repos) with commercial banks that hold Government bonds and require liquidity to meet short-term obligations.
On the issue of IMF SDR resources to the Government, BoG noted that GH¢6.2 reflected on-lending of IMF SDR resources to Government, in line with the overall objective of the special SDR operation by the IMF.
It added that “however, in this particular instance, the special SDR allocation by the IMF was designed to provide budget support to countries to help address issues related to the Covid-19 pandemic. Last year, the Bank of Ghana received an additional SDR allocation of SDR 707.3 million (US$1.001 billion)” It noted that IMF resources were usually meant for Balance of Payments support, which goes directly to the central banks.
The Bank further disclosed that an amount of GH¢2.85 billion reflected a drawdown on the Government’s own deposits held with the Bank of Ghana.
These, it explained, included statutory funds such as the GET FUND, National Health insurance, District Assembly Common Fund and the Sinking Fund.
Also, included are donor-related funds as well as the Ministries, Departments and Agencies (MDAs) operational accounts with the Bank of Ghana.
BoG also indicated that a residual amount of GH¢11.4 billion included in the GH¢22.04 billion represented an overdrawn balance on the Government’s treasury main account held with the Bank of Ghana as of the reporting date.
It said that overdrafts of this nature occurred from time to time, as the auction system had been designed to ensure same day
settlement of maturities and interest payments, once the auction is concluded.
“This guarantee of same-day settlement of maturities and interest payments, which has always been part of the auction system, has underpinned the development of the local currency bond market.
“With such a guarantee, on occasions when there have been uncovered auctions, maturities are automatically settled and then reconciliation is done with
Government. Incoming Government cash deposits are then used automatically to liquidate such overdrawn balances on a rolling and continuous basis” the central bank explained.
It said that the current gap of GH¢11.4 billion reflected the net amount of the gap at the end of June 2022.
This balance is cleared regularly. Any outstanding balance has to be cleared by the end of the year. “Bank of Ghana would like to assure the public that in carrying
out its functions as banker to Government, it is committed to complying fully with all relevant legal requirements,” the statement added.
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