Government has drawn down on its deposits at the Central Bank, injecting GH¢10 billion into the economy in the first quarter of the year, in order to shore up its fiscal operations, the financial data from the Ministry of Finance has revealed.

The fiscal data shows that the drawdown from the Bank of Ghana in January 2022 amounted to GH¢6.87 billion and GH¢3.54 billion in March 2022.

Commenting on the data released, Senior Analyst with Databank – an asset management company – Courage Kingsley Martey noted that this has been classified by the government as a drawdown on deposits at the Bank of Ghana.

“This suggests that all the GH¢10 billion would not be a borrowing/financing from the BoG.

For instance, you’d recall that when government received the US$1 billion SDR [special drawing right] last year, it still had two-thirds left at the BoG that they didn’t use. The plan is to use it this year. So, we can expect that this would be part of the deposit drawdowns,” he said.

This notwithstanding, the Ministry of Finance and the BoG have an agreement on enforcing the memorandum of understanding on zero financing of the budget, in order to maintain price stability.

“This is just a gentleman’s agreement. But in law, the BoG Act allows the Bank of Ghana to finance govt by up to 5 percent of the previous year’s revenue. So, in that sense, if the financing remains within the 5 percent limit, we can say it doesn’t break any rules,” Mr. Martey said.

In 2020, the central bank shelved its zero-financing policy to lend government GH¢10 billion (US$1.7 billion) under its asset purchase agreement to help mitigate the impact of the coronavirus pandemic on the economy.

Governor of the Bank of Ghana, Dr. Ernest Addison did indicate at the time that an MoU signed during the IMF programme, allows financing of the budget through whichever method, whether an asset purchase programme, some other overdraft, or some other window.

“We are more or less suspending that memorandum of understanding, which would have expired at the end of 2020 anyway so that we will be able to participate in the debt market.”

Q1 Fiscal Outturn

Available data from the first quarter economic outturns published by government shows that fiscal deficit target for the first quarter of 2022 has been missed with a deficit of 2.6 percent against a programmed target of 2.3 percent.

Domestic revenue amounted to GH¢16.62 billion against the period target of GH¢19.18 billion. Total tax revenue of GH¢14.6 billion was projected to be collected for the first quarter of this year in the 2022 budget, however, only GH¢12.8 billion was collected.

Total expenditure for the period was about GH¢ 26.95 billion compared with a target amount of GH¢30.52 billion.