Ghana passes law banning direct or indirect loans to govt unless 'exceptional, clear' reasons given

Ghana's parliament on Thursday approved amendments to the Bank of Ghana Act, imposing stricter limits on central bank financing of the government to safeguard its independence.

The Bank of Ghana (Amendment) Bill, 2025, bars the central bank from buying government securities on the primary market and redefines emergency provisions that previously allowed officials to bypass a 5% lending cap tied to the prior year's revenues.

Emergencies are now restricted to force majeure events such as natural disasters, presidentially declared crises or public health emergencies.

The reforms follow criticism over heavy central bank support during the COVID-19 pandemic and its aftermath, when Ghana lost access to international capital markets, inflation surged and the Bank of Ghana posted negative equity after extending overdrafts and other assistance to manage fiscal imbalances.

Direct or indirect loans to state

The revised law bans all direct or indirect loans to the government apart from under exceptional, clearly defined circumstances such as temporary revenue shortfalls. Such advances will carry repayment terms, face capped limits and require parliamentary approval.

The legislation also introduces stricter board eligibility requirements and enhanced audit oversight, in line with the International Monetary Fund programme agreed in 2023 to curb central bank financing, stabilise inflation and restore investor confidence.

Finance Minister Cassiel Ato Forson told parliament the reforms would "strengthen the central bank" while maintaining its autonomy.

The bill also sets the framework for joint medium-term inflation targeting with the government. Pending presidential approval, the amendments include provisions for the state to recapitalise the central bank to meet legal requirements.