BoG not to finance budget deficit – Terkper

Government will for the first time not seek funding from the Bank of Ghana to finance the country’s budget deficit.
This is according to Minister of Finance, Seth Terkper.

Presenting the 2016 midyear budget review and supplementary budget statement to Parliament today, July 25, Mr. Terkper explained that the financing of the country’s deficit is not in jeopardy as government will not seek funding from the central bank.
He however told Parliament that such deficits will be financed from revenue mobilized from the capital markets adding that when necessary, the government will resort to the Sinking Fund to offset the country’s deficits.

The Minister’s comments come at a time that concerns have been raised by some industry watchers that the IMF Board may make it difficult to approve the third tranche of the Fund’s support to Ghana under the three year economic assistance program, if a Bill (Bank of Ghana Amendment Bill, 2016), seeking to cap BoG’s financing of the country’s budget at 5 percent, is passed.

Currently, the central bank is allowed to providing up to 10 percent of the previous year’s total revenue to finance the country’s budget deficit.
Some critics insist that the decision to put the cap at 5 percent will rather contrast government’s agreement with the IMF which does not agree with the decision for central banks to fund budget deficits of countries it provides with economic support.

But speaking to Citi Business News on the issue, the Member of Parliament for Ho Central and a member of Parliament’s Finance Committee, Benjamin Kpodo dismissed such reports.
He rather explained that the delay by the IMF Board to approve the third tranche of the 918 million dollars economic assistance program should rather be attributed to the Fund’s own internal arrangements and also perhaps the inability to pass the Public Revenue Management Act (PRMA).

The Finance Minister, Seth Terkper is however optimistic the IMF Board will conclude its review and approve the third tranche of the economic assistance program by the end of August this year.