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Ghanaian Bank Governor Ernest Addison has ruled out lending more to the government to help reduce the budget deficit, saying it would jeopardize exchange rate stability.
The central bank canceled its zero-funding policy this year to lend the government 10 billion cedis ($ 1.7 billion) to help mitigate the impact of the coronavirus pandemic on the West African economy. Ghana’s budget deficit is expected to reach 11.4% of gross domestic product by the end of December, compared to the initial target of 4.7% of GDP.
“The high fiscal gap raises major funding issues,” Addison said in a speech late Thursday in the capital Accra. “Its financing should not be used by central bank funds, as this will weaken the central bank’s ability to serve as an anchor for the stability of the exchange rate and the exchange rate.”
Cedi had its most stable spell in more than a decade this year, weakening 2.6% against the US dollar. That’s even like The global health crisis has brought Ghana’s debt-to-GDP ratio to 71% in September, the highest in four years.
“In the future, difficult decisions will have to be made to reorganize public finances and spending priorities, while exploring more sustainable sources of revenue,” Addison said.