Reconsider your view that SDR constitutes ‘free money’- Adongo to BoG Governor

The Member of Parliament for Bolgatanga Central Constituency, Isaac Adongo has indicated that SDRs do not constitute ‘free money to be distributed at the discretion of the BoG Governor based on a convoluted interpretation of the laws of Ghana and best international practice.

He is therefore calling on Dr.Ernest Addison to reconsider his view.

In a 4-page letter addressed to the Governor, Mr. Adongo referred to a response attributed to the BoG Governor during the recent MPC Press Conference in which he(The Governor) suggested that $300 million of the SDR equivalent will be surrendered by the BoG to the Government to fund the 2022 budget expenditures and that it will not count as BoG financing of the Government budget since the SDRs are not BoG’s resources.

The legislator, therefore, described the above as most unfortunate and a perverse interpretation of the rules that govern the BoGs mandate however noted that it will not be far-fetched for the Governor to suggest that he is willing to surrender his fiduciary responsibility to protect the resources of Bog and uphold its laws.

In the wake of the Covid-19 pandemic and its impacts on the global economy, the IMF instituted measures to assist Governments in tacking the different risks and vulnerabilities to their economies.

These included:

a.Expedited arrangements for countries to access the Rapid Credit Facility(RCF) to address the fiscal impact of covid-19 on economies and make financial resources available to Governments to address additional covid 19 related revenue shortfalls and expenditures. These monies were paid to Government accounts for utilization ‘without conditions’. The Government of Ghana accessed the US $1 billion from the IMF for this purpose. This accompanied an application to the parliament of Ghana to suspend relevant ‘fiscal rules’ as allowed and an asset purchase arrangement from the Bank of Ghana in a historic fiscal expansion program never experienced in Ghana.

b.The establishment of a US 650 billion increase in special drawings rights(SDR) of several member countries. This was distributed to member countries’ Central Banks to augment their foreign reserves that have been constrained by covid-19s disruption of global supply chains and its attendant effects on foreign inflows from exports. Unlike the RCF fiscal support to Governments, these monies were rightly paid directly to the account of the Bank of Ghana as assets of the Central Bank and not Government accounts with BOG.

According to Mr.Adongo, SDRs are only equivalent in a trading currency and cannot be converted into cash in any currency without interest accruing to the country that holds that currency as its proprietary legal tender.

Moreover, he noted that the utilization of the SDR must be done in compliance with the governance framework of the member countries thus the constitution, Public Financial Management Act and the Bank of Ghana Act, 2002(Act 612) and its Amendment, 2016(Act 918) as suggested by the IMF.

Mr.Adongo also indicated in the latter that the BOG Act and its Amendment Act do not provide for freebies from the BOG to Government. Instead, it imposes responsibility on the Governor to report to the Minister anytime the 5% threshold is exceeded.

Also, he expressed worry about the Governor’s seemingly default inclination to aggravate the breaches of the laws of Ghana, including supporting, the exceeding of the 5% threshold, engrained in the BOG’s Act.

In conclusion, the Bolga Central MP urged the Governor of the Central Bank to remedy his earlier plethora of breaches of the BOG laws while being mindful of the potentially dire consequences and remaining resilient.