GOVERNOR of the Bank of Ghana (BoG), Dr Ernest Addison, has indicated that plans are afoot to take government off central bank support to make the Bank’s inflation targeting and interest rate policy targets achievable.
This is in spite of the fact that the Governor has defended the central bank’s decision to finance government expenditure in 2022, stating that the economy would have been destabilized if the BoG had not stepped in.
The Governor explained that the situation became unsustainable by mid-2022, leading to the government’s decision to seek support from the International Monetary Fund (IMF).
“They admitted that the financing from the central bank was needed until we had a plan,” said Dr. Addison. “We have been discussing this plan with the IMF over the last three to six months and finally had a staff-level agreement in December.”
One of the key objectives of the IMF programme, according to Dr. Addison, was to ensure that the revenue and expenditure plan for 2023 does not require central bank financing, making the central bank’s interest rate policy more effective.
He added that there was also a decision on aligning structural policy, hence the decision to include state-owned enterprises (SOEs).
“It is important that SOEs are competitive and efficient and it is expected that we will have a policy which will state clearly what the objectives and guiding principles of state ownership will be,” the Governor said.
“It must also state clearly what the roles and responsibilities of the shareholder or the management of SOEs will be.
“The policy should also specify what the fiscal relations between the government and SOEs are, including the financing of SOEs and dividend payments,” he added.
He is of the view that it is important for the policy to also provide a framework for the remuneration of board members and the executive management of SOEs and also a framework for the appointment of board members, as well as executive management, based on their technical competence.
He pointed out that it is long overdue to place a cap on the salary adjustment of SOEs.