Finance Minister, Hon Ken Ofori Atta

Government has submitted a Memorandum to Parliament to access emergency financing from Bank of Ghana. Minister for Finance Ken Ofori Atta presented the Memorandum on Thursday 28th May 2020 to the House. 

The COVID-19 pandemic, he said, is posing significant challenges to government operations, particularly implementation of the 2020 Budget due to shortfalls in revenues, additional emergency spending, and tight financing conditions. 

According to him, the revenue shortfalls arise from plunging crude oil prices; shortfalls in import duties and other taxes; and shortfalls in non-tax reverues. 

These, he said, are significantly affecting the cash flows for the year and posing a threat to containing the pandemic. He disclosed that preliminary assessment puts the fiscal gap at about GH¢ 21.42 billion. 

He said, “The current domestic market condition in the wake of the pandemic has reduced liquidity on the market.” 

“Since the beginning of the year, there have been sell-offs by non-resident investors, which has heightened these liquidity constraints, therefore, financing the residual gap would not only signiticantly increase domestic interest rates but would be counter-productive by denying the private sector access to cheaper sources of financing,” he said. 

Global financing conditions, he said, have also worsened as investors have negative sentiments towards emerging markets.

” As a result, the international capital markets remain largely closed to emerging market issuances.”

Mr. Ofori Atta explained that the identified financing measures of Government, including the IMF Rapid Credit Facility (US$1.0 billion), the World Bank DPO (US$350 million), Stabilisation Fund (US$219 million) still results in a residual financing gap of about GH¢17.9 billion to be sourced from both the domestic and external markets.

“While we are in the early stages, work done by the Ministry of Finance (MoF) and the Bank

of Ghana (BoG) on the initial potential impact of the COVID-19 Pandemic on various sectors of the economy show that real GDP growth will slow down significantly from the projected 6.8 percent to 1.5 percent, with lingering effects on economic activity into 2021 and beyond,” he said.

President Nana Akufo-Addo, he said, has therefore instructed the Ministry to initiate a stabilisation and revitalisation plan for the country. 

“The Ministry is, in this regard, developing a 3-year Covid-19 Alleviation and Revitalization of Enterprise Support Program (The Ghana CARES Program) to help stabilize and revitalize the economy.” 

He disclosed that together with the Governor of Bank of Ghana and the Controller and Accountant General, they have agreed to trigger the emergency financing provisions as required under Section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended. 

This, he said, permits increasing the limit on the purchase of Government securities by Bank of Ghana in the event of any emergency, to help finance the residual expenditures.

“The Government has, therefore, decided to launch a special COVID-19 Relief Bond programme with a size of GH¢10.0 billion.” 

“The coupon rate is pegged to the prevailing monetary policy rate with a 10-year tenor and 2-year moratorium on both principal and interest payments.

Bank of Ghana, he said, has released the first tranche of the facility amounting to GH¢5.5 billion to the Ministry of Finance consistent with global policy responses of Central Banks with large scale asset purcheses to provide support to manage the pandemic.