Economist and Finance Lecturer at the University of Ghana, Professor Godfred Bokpin, has supported calls for the Bank of Ghana to finance the government’s budget deficit.
Prof. Bokpin’s support for a budget deficit financing by the BoG, however, comes with a caveat that government will channel funds from the Central Bank into the productive sectors of the economy.
According to Prof. Bokpin, failure on the part of government to channel funds from the Central Bank into productive sectors of the economy will result in high inflation.
“I support calls for budget deficit financing by the BOG, but that is if it only goes to the productive sectors of the economy.
“But the problem is that, if you have a large government size that is largely inefficient, and for the Central Bank to print more money that will not go to the productive sectors of the economy, there will be a rise in inflationary pressures that will result in high inflation because excess injection of liquidity didn’t go into the productive sectors,” he remarked.
Prof. Bokpin made the assertion speaking to norvanreports at the stakeholder engagement on government‘s compliance to the Public Financial Management Laws, held by the Natural Resource Governance Institute (NRGI) and PFM Tax Africa.
Prof Ackah suggests GHS 100bn BoG-backed loans to Gov’t
Economist with the Institute of Statistical, Social and Economic Research (ISSER), Professor Charles Ackah, some weeks ago called for increased financing of government’s budget by the Bank of Ghana.
The call by Prof Ackah was on the back of some GHS 10.5bn financing of government’s budget during the Covid pandemic.
According to Prof. Ackah, budget financing by Central Banks is practiced in most countries, particularly developed countries.
Speaking in an interview, Prof Ackah expressed the view that government at the moment, lacks the fiscal space to increase spending to stimulate aggregate demand and ultimately economic growth.
According to him, government within the present economic circumstances needs to spend more and not be austere.
“All over the world, countries have realised that the orthodox policies instituted by the Bretton Wood Institutions to finance development are not working anymore and as such are calling on Central Banks to finance development.
“Most developed countries are practicing quantitative easing to finance development and we should be doing the same.
“The government in this time needs to spend more to stimulate demand and spur economic growth to increase GDP and consequently reduce the country’s debt to GDP,” he remarked.
“At the moment government needs to create more fiscal space to spend and the Bank of Ghana must provide government with loans. If government can raise like GHS 100bn from the Central Bank to spend in critical areas of the economy without cutting expenditure, that will be very help for the economy,” he quipped.
Source: norvanreports.com