The Bank of Ghana, under its Asset Purchase Programme, has purchased a Government of Ghana COVID-19 relief bond with a face value of GHc 5.5 billion at the Monetary Policy Rate of 14.5 percent.
According to a statement issued by the central bank, the bond will have a tenor of 10-years and a moratorium of two years for the principal and interest payments.
“The Bank stands ready to continue with its Asset Purchase Programme up to GH¢10 billion in line with the current estimates of the financing gap from the COVID-19 pandemic,” the Bank said in the statement.
This forms part of the Banks additional monetary policy measures to reduce the impact of the novel coronavirus on the economy and to help close governments financing gap.
The action taken is in line with the section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended, which allows the BoG to trigger emergency financing provisions, permitting it to increase the limit on the purchases of government securities in the event of any emergency to help finance the residual financing gap.
Nevertheless, subject to the sub-section of Act 612, the Minister of finance will have to submit a report on the issue to Parliament within seven sitting days.
The Act says; “In the event of an emergency, the Governor, the Minister and the Controller and Accountant-General shall meet to decide the limit of borrowing that should be made by Government and the Minister shall submit a report on the issue to Parliament within seven sitting days.”
The central bank also noted in its statement that government’s financing gap that was estimated at the time of applying for the International Monetary Funds (IMF) Rapid Credit Facility (RCF) in March has widened significantly, resulting in a large residual financing gap.
In view of this, the Bank believes that the current market conditions in the wake of the pandemic, will not allow the financing of the gap from the domestic debt capital markets without significantly increasing interest rates.
The COVID-19 pandemic has put a severe strain on the budget, manifesting in petroleum revenue shortfalls as a result of plunging crude oil prices, shortfalls in import duties, other tax revenues, and non-tax revenues.