Ghana's parliament deepens central bank's autonomy

Ghana's Parliament passed the Bank of Ghana (BoG) Amendment Bill here on Wednesday to deepen the autonomy of the central bank.

The amendment, which has the objective to strengthen significantly the central bank's functional autonomy, governance and ability to respond to banking sector crises, was passed after the original amendment bill had been revised.

"The Bill sought to plug the loopholes identified in Act 612. These loopholes were identified in consequence of an examination of current international trends and what pertains in other jurisdictions," explained a statement issued by Deputy Minister of Finance Cassiel Ato Forson.

The amendment revoked the influence of the Minister of Finance in the appointment of members of the Monetary Policy Committee, which is now the responsibility of the Bank of Ghana.

The Bill also introduces a new qualification criterion for board members.

The process to amend the Bill started as a result of the Three-year Extended Credit Facility (ECF) agreement Ghana entered into with the International Monetary Fund (IMF) after severe economic crisis that saw the country's fiscal slippage ballooning to nearly 12 percent of Gross Domestic Product (GDP).

Although the IMF agreement required Ghana to have a zero BoG financing, with a window of 2.0 percent to 3.0 percent of BoG financing for liquidity management, the new amendment fixed the central bank financing of government deficit at 5.0 percent of the previous year's revenue.

"Even though Parliament has passed a BoG financing limit of 5.0 percent of previous year's revenue in the Bank of Ghana Amendment Bill, the government remains committed and will still continue to implement the ECF Program as agreed with the Fund," the statement emphasized.

It added that government of Ghana was committed to the ECF Program, adding that currently, government has no incentive to borrow from the BoG. Endit