BoG loans GH¢5.5 billion to gov't to curtail coronavirus revenue shortfalls

The Bank of Ghana (BoG) has agreed to loan up to GH¢5.5 billion to government to curtail income revenue shortfalls caused by the coronavirus pandemic by close of the year, Governor of the central bank, Dr. Ernest Addison has disclosed.

Speaking at a press briefing on Friday, May 15 to announce the monetary policy rate, Dr Addison explained the BoG's financing of government’s deficit forms part of the Bank’s assets purchase programme which was set aside due to an agreement with the International Monetary Fund (IMF).

Adding, the first tranche of GH¢5.5 billion has been advanced to government at a rate of 14.5 percent which prevails the current monetary policy rate.

“Under the Bank of Ghana’s Asset Purchase Programme, the Bank has purchased a Government of Ghana COVID-19 relief bond with a face value of GH¢5.5 billion at the Monetary Policy Rate with a 10-year tenor and a moratorium of two (2) years (principal and interest),” Dr Addison noted.

“The Bank stands ready to continue with its Asset Purchase Programme up to GH¢10 billion in line with the current estimates of the financing gap from the COVID-19 pandemic.

The COVID-19 pandemic has put a severe strain on the budget, manifesting in petroleum revenue shortfalls as a result of plunging crude oil prices, shortfalls in import duties, other tax revenues, and non-tax revenues,” he explained.

“Under the circumstances and in line with section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended, the Bank of Ghana has triggered the emergency financing provisions, which permits the Bank to increase the limit of BOG’s purchases of government securities in the event of any emergency to help finance the residual financing gap,” the Governor said.

Meanwhile, the Monetary Policy Committee of the Central Bank has kept its policy rate unchanged at 14.5 percent following a sudden rise in inflation.

The Governor added the bank’s latest forecast points to elevated risks to the inflation outlook in the forecast horizon, underscored by the recent jump in headline inflation.