US-based Associate Professor of Finance at Andrews University in Michigan USA, Williams Kwasi Peprah, has accused the Bank of Ghana for high inflation in the country.
The Bank of Ghana has justified financing of the government’s 2022 budget with about ¢44.5 billion.
In a statement, the Central Bank said its financing of government was part of a crises management tool used in dealing with the difficulties of 2022.
“It must be recognised that the ongoing debt operations are part of the corrective measures designed to address the financing problem of the budget. Bank of Ghana financing was part of a crises management tool used in dealing with the difficulties of 2022”.
But speaking to Joy Business, Professor Peprah said the Central Bank’s justification does not hold.
“I don’t understand why the Bank of Ghana will have to rush and issue a justification in which it has a lot of problems”.
“If you look at the Bank of Ghana’s statement, they have a line item which states that in 2019, the Parliament of Ghana suspended the Fiscal Responsibility Act, 2018, Act 982 in view of the crises precipitated by COVID 19 pandemic. The question is when did the Covid-19 pandemic come? It started in November, December 2019. The suspension of the Fiscal Responsibility Act was done in 2018. So in their defense, they have also made an error which sometimes they have to take their time”, he explained.
Professor Peprah also expressed disappointment that the government did not listen to advice by going to the International Monetary Fund when the economy was experiencing challenges.
“I do understand that government had liquidity challenges starting from 2018 which academia and other political entities were cautioning government to be careful with the way we were going. Government did not listen that was why I predicted that we should go and get support from the IMF, the Finance Minister [Ken Ofori-Atta] refused to go and later accepted and it was too late for him”
“So what has really happened with this impact of the ¢44.5 billion support for the country is that the inflation rate that we see which is about 54.1%, almost half can be attributed to this action. I’m saying this because Ghana’s total revenue is ¢77 billion – 57.5% of that revenue – ¢44.5 billion was given to government. In economics and finance, when central banks lend or give overdraft or we call it monetization or printing of money, you increase inflation in the country”, he pointed out.
He concluded that the Bank of Ghana must solely take the blame for the high inflation in the country, stating that “if they were to be very disciplined, and tell government that we can support you but we cannot give you support of more than half of the country’s total revenue the situation would have been normalised”.