Central Bank Confirms Statesman $1.5bn Story, But...

Following our publication that the Mills government sought to get the Central Bank to print $1.5 billion worth of cedis to help government pay off arrears, the Bank of Ghana has issued a statement to confirm the request. But insists the money could have been provided in other ways without necessary printing more cedis to cause inflation.

"In the particular case that is the subject matter in your publicationm" the BoG press release explains, "government sought the general assistance of the Bank of Ghana, as normal practice, to raise GH¢1.5 billion over a period to augment its fiscal resource base so as to meet outstanding arrears that accumulated in 2008 and were not known at the time of preparing the budget."

But the statement signed by the Central Bank's secretary Alex Bernasko says, "The amount was to be raised over a period of time so as not to compromise macroeconomic stability."

The Central Bank explains that "there are several alternative ways by which the Bank assists government in such cases.  For example, the Bank may decide to float government bills or issue bonds to the domestic market on behalf of government, or the Bank may grant temporary advances to government subject to the statutory limits provided in Section 30 of Act 612."

 
The BoG assures that it will only fulfil the request by applying "the appropriate financing method is used, that will not impact adversely on macroeconomic stability."

On the issue of printing extra money to risk inflation, the statement says, " In any case, it is even not feasible or prudent to print currency of such magnitude in such a short period of time."

It is recalled that under the previous governor and student of the Milton Friedman economic model, Paul Acquah, inflation targetting was the main policy the Bank applied to achieve macro-economic stability. It is yet to shown whether under Amissah Arthur, the new governor who took over this month, that policy shall be maintained.