Think tank raises concerns over BoG funding of govt

Policy think tank, Institute of Fiscal Studies (IFS), has raised concerns about the Bank of Ghana’s financing of the budget  of up to GH¢1.4 billion despite an IMF restriction.

The institute, in a post supplementary budget analysis, described curious the GH₵1.4 billion as financing from the Bank of Ghana, as against the IMF’s continuous condition of zero central bank financing in 2016.

“While we hold the view that abolishing central bank lending to the government is ill-advised, we are not aware of any change to the zero financing condition under the IMF programme.

“If the central bank is to provide financing to the government, where does this leave the IMF programme?” the think asked in a statement.

IMF conditions

A clause under the IMF-extended three year credit facility of SDR664.20 million (US$918 million) to the country requested the government to undertake zero per cent financing of its budget from the central bank following the passage of the Bank of Ghana (BoG) Amendment Bill.

Currently, the BoG Act requires that the central bank’s monetary financing must not exceed 10 per cent of the previous year’s total revenues. But, consistently, the BoG has not been able to keep to this limit.

The IMF will in the coming days engage the government on the status of the country’s programme with the fund. This was after Parliament voted to amend the existing Bank of Ghana law.

This will allow for government borrowing from the Central Bank of up to five per cent of previous year’s revenue.

But the think tank is worried about the breach of the IMF conditions and the possible implications of the country’s future relationship with the IMF.

Delay in payment of arrears

 The institute is also worried about the delay in the payment of arrears which has become a major driver of government expenditure. Despite successive budgets allocating substantial funds for the clearance of the arrears, huge payments continue to recur.

In 2016, GH¢2.3 billion has been budgeted for arrears payments after payments of GH¢4.1 billion in 2014 and GH¢2.4 billion in 2015.

The institute said since information on the stock of arrears was not provided in the budget, it was difficult to make sense of those numbers.

“To make this aspect of the budget more transparent and also help monitor compliance by the government with its commitment to zero arrears creation in the IMF programme, details of the stock of arrears, its evolution and the liquidation payments need to be disclosed,” it suggested.

Discrepancy with govt data

The economic think tank also observed a large discrepancy of GH¢1.7 billion in the January to May 2016 fiscal data provided by the government.

“In the light of the government’s financial management reforms, particularly the deployment of the Ghana Integrated Financial Management Information System (GIFMIS) within the public sector, a discrepancy figure of such large magnitude is puzzling,” the IFS said.