Former Finance Minister, Seth Terkper has maintained that the Mahama administration did not directly borrow from the Bank of Ghana (BoG) to finance the 2016 Budget.
Mr. Terkper said the government in 2016 couldn’t have gone for BoG financing to support its expenditure since there was an IMF conditionality that barred central bank financing.
“I signed the Non-Lending Memorandum of Understanding (MOU) with the Governor of BoG, as an IMF Conditionality under the IMF Enhanced Credit Facility (ECF) Agreement, even as we went through the Crude Oil Price Shock (2014 to 2016) and Nigeria Gas Supply (Dumsor) crisis,” he said in a statement.
Mr. Terkper pointed out that, the various roles of the BoG aimed at supporting the fiscal policies of a government must not be confused with central bank financing.
“BOG performs various roles on the Financial Markets for government, including borrowing on behalf of government,” he said adding that “these short-term and medium-to-long term loan instruments are called T-Bills, Notes, Bonds etc”.
He explained that upon borrowing, such instruments become government of Ghana instruments and hence cannot be classified as BoG financing of the budget.
“In the Budgets and Debt Reports, while BoG is shown as the “source” of securing these loans, it does not mean that the Central Bank did the lending directly to Govt. Hence, it is a big mistake for the FACT-CHECK to classify these as BOG Lending directly to the Mahama government,” he stressed.
He stated that the BoG itself is in the Financial Markets to lend and borrow to manage the financial sector.
Mr. Terkper recalled that even though the BoG Act allows it to make an advance of up to 5 percent to government, the IMF ECF Agreement did not allow the Mahama Administration to borrow from the BoG.
“The only substantive amount that GOG received from BoG at the time was “Dividend”, as sole Shareholder of the Bank. This routinely shown as Non-Tax Revenue in Budget,” he said.