Parliament on Tuesday passed the Bank of Ghana (BoG) Amendment Bill to significantly strengthen the Central Bank’s functional autonomy, governance and ability to respond to banking sector crises.
The Bill seeks to plug the loopholes identified in Act 612, following an examination of current international trends and what pertains in other jurisdiction.
A statement signed by Mr Cassiel Ato Forson, Deputy Minister of Finance, said the amendment also seeks to separate the autonomy provisioned from other objectives of the bank to strengthen the autonomy of the BoG in the performance of its functions.
The Bill introduces a new qualification criterion for Board members, including extensive knowledge and experience as regards monetary, banking, financial and economic matters or any discipline relevant to the functions of the Board.
“It is important to note that with the amendment of this Bill, the Minister of Finance’s influence in the appointing of members of the Monetary Policy Committee has been revoked and the Bank of Ghana takes full responsibility for that,” the statement said.
This amendment of the BoG Bill comes in the middle of the IMF programme that requires zero BoG financing with a window of two – three per cent of BoG financing for liquidity management.
The statement said Government remained committed to the IMF-supported Extended Credit Facility (ECF) Programme and emphasised the significant progress made in implementing the Programme as evident in two successful reviews of the IMF Programme.
“The third review mission was concluded in May, and we are awaiting the Fund to go to the Board for the approval of the third review on August 29,” the statement said.
Even though Parliament has passed a BoG financing limit of five per cent of previous year’s revenue in the BoG Amendment Bill, the Government remains committed and would still continue to implement the ECF Programme as agreed with the Fund.
“In doing so, we will continue to adhere to the requirement of zero BoG financing under the IMF-ECF Programme—as a matter of fiscal prudence—as we have done since the beginning of the year.”
Currently, government has no incentive to borrow from the BoG policy rate is above the market rate for Government’s instrument.
“Prior to this year, we observed a reduction in BoG financing of the budget from 10 per cent, under the BoG Act, to five per cent in 2015,” the statement said.
Furthermore, it should be noted that under the Fund programme, Government is allowed to temporarily borrow up to two per cent of previous year’s revenue within a 90- day windows in special circumstances.
“To help us manage liquidity pressures under the zero financing, we are improving domestic revenue mobilisation with the implementation of tax measures as well as improving tax administration.
“We have switched successfully to the Ghana Stock Exchange to finance long-term Budget needs, compared to the relatively short-term BoG Treasury Bill market or auctions.
“Additionally, a number of initiatives to strengthen cash management are being implemented, including a Cash Management Operational Framework which forecast revenue and public expenditure numbers two weeks ahead of time has been developed.
“The framework provides information on government cash flows on a weekly basis.
“The new Public Financial Management (PFM) Bill, currently being debated in Parliament, contains provisions for prudent economic management to codify for the first time, some of the measures being implemented under the Government’s own Home-Grown (and now IMF) Programme.
“For the first time, extensive provisions relating to budget and fiscal rules, including the budget deficit, financing and public debt, are also codified in the PFM Bill.”