BoG amendment bill reopens backdoor to central bank financing – IERRP’s Dr. Nyame Baafi

Dr Nyame Baafi, a Senior Research Fellow at the Institute of Economic Research and Public Policy (IERPP), has raised strong concerns over the proposed Bank of Ghana (Amendment) Bill, describing it as a “walking contradiction” that undermines the very principle of central bank independence the government claims to be strengthening.

In a Facebook post on Saturday, December 20, 2025, Dr Baafi argued that while the bill appears, at first glance, to impose tighter limits on central bank financing of government, a closer examination reveals provisions that could reopen the door to Bank of Ghana (BoG) support for government spending.

“A surface reading creates the impression that the Government of Ghana is strengthening central bank independence by approving tighter limits on central bank financing. In reality, however, the bill introduces a back-door mechanism for financing government through the Bank of Ghana,” he wrote

Dr Baafi drew attention to Clause 11 of the proposed amendment, which empowers the central bank to provide temporary financing to government under certain conditions. According to the clause, the Bank of Ghana may, “for the sole purpose of filling a seasonal shortfall of budgeted revenues of Government, make an advance to government by overdraft or in any other form the Board determines….”

Interpreting the practical implications of this provision, Dr Baafi cautioned that it gives government significant leeway to rely on the central bank whenever revenues fall short.

“What does this mean in practice?” he asked. “It means that anytime government experiences a revenue shortfall, which occurred in 2025 and is highly likely again in 2026—the Bank of Ghana can step in to support government financing.”

He cautioned that such an arrangement risks reversing the hard-won gains Ghana has made in recent years following painful fiscal and monetary reforms.

“This reopens the door to the very challenges Ghana has only recently endured and overcame through painful reforms: elevated public debt, inflationary pressures, and weakened macroeconomic credibility,” Dr Baafi stated.

Beyond the immediate fiscal risks, the IERPP Senior Research Fellow expressed concern about the broader institutional implications of the bill. He argued that, contrary to official assurances, the amendment lays the groundwork for renewed BoG financing of government in the medium term.

“Contrary to the reassuring public narrative, the government is effectively preparing the grounds for renewed BoG financing in 2026 and 2027,” he wrote.

Dr Baafi further described the clause as a formalisation of fiscal dominance, warning that it strengthens the historical influence of the Ministry of Finance over the central bank.

“More troublingly, this provision legislates fiscal dominance and reasserts the influence and control that the Ministry of Finance has historically sought over the central bank, amounting to institutional capture under the guise of reform,” he argued.

He also questioned the apparent silence of Ghana’s development partners, particularly the International Monetary Fund (IMF), given that the country is currently under an IMF-supported programme.

“Even more surprising is how the IMF is looking on for the government to weaken the central bank, even under an IMF-supported program,” Dr Baafi noted.

He further warned of difficult times ahead if the concerns raised by the bill are not adequately addressed. “We are in for a long ride,” he wrote.