Gov’t to limit borrowing to 10 per cent of
total revenue
Gov’t to limit borrowing to 10 per cent of
total revenue
Akosombo (Eastern Region) 10 December 2001- A deputy Minister of Finance at the weekend, called for the strengthening of the Central Bank to ensure the growth of the economy through strict accountability and judicious use of the country's financial resources.
The need to empower the Central Bank was long over due in the face of the current economic difficulties, Mrs Grace Coleman told members of the Finance Committee of Parliament at a workshop at Akosombo.
The workshop was organised by the Institute of Economic Affairs (IEA) in collaboration with the Ministry of Finance to discuss a new Bill, which sought to revise the focus and legal framework of the Bank of Ghana (BOG).
In attendance were directors and other office-holders at the BOG as well as policy directors of the Finance Ministry who responded to questions from the MPs on the proposals in the bill.
Mrs Coleman said if enacted, the new legislation would strengthen the independence of the Central Bank to make it more effective in management of the economy.
Striking features outlined by the memorandum accompanying the bill were proposals limiting the government’s borrowing to 10 per cent of total revenue of the fiscal year, and the abolishing of external loan guarantees to private organisations.
It also sought to raise the Bank's authorised capital from 100 billion cedis to 700 billion cedis and vests the holding of all foreign exchange of the state in it.
Mrs Coleman said the existing law, PNDCL 291 did not only frustrate the effectiveness of the Central Bank but it was also inconsistent with the constitution.
She said while the Constitution mandated the Bank to be operationally independent, the existing law subjected the BOG to frequent controls and consultations on money supply and prices, as well as the determination of exchange rate and appointment of directors.
In addition, the regulatory and legal framework governing the Bank's operations were not in tandem with changing trends in the financial sector, thus rendering it ineffective.
The Deputy Minister said the government inherited a weak economy, characterised by high inflation rate, depreciating cedi and huge deficit. This, she said, resulted in huge borrowing because the Central Bank lacked the independence and legal authority to deal with issues of price stabilisation and monetary policy without interference from the Executive.
Mrs Coleman said the proposal to limit the government’s borrowing to 10 per cent of total revenue was a very bold one. "It indicates the commitment of the NPP government to ensure fiscal discipline and put the macro economic fundamentals of the country on the right footing."
Mr Van-Lare Dosoo, Deputy Governor of the BOG gave an overview of the bill saying that it aimed at giving a new status for a national monetary policy.
Dr Joe Amoako-Tuffuor, an Economist with the IEA, said no matter how refined the legislation was, the ability of the Bank to pursue its objectives and functions could only be effective if the government adopted prudent fiscal measures.
Failure to manage the size of domestic debt and failure to minimise shocks to government expenditures, lack of control over domestic spending were all likely to undermine the letter of the law, he added.
Mr Eugene Atta Agyapong, Deputy Chairman of the Committee who presided over the three-day meeting, called for an intensified public education and participation in the enactment of the Bill, which was yet to go before Parliament.
GRi…/
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