The Governor of the Bank of Ghana (BoG) Dr Ernest Addison has said the current Act that governs the operations of the central bank needs clarification.
For example, he said there is the issue of an emergency that needs to be properly defined.
What do you call an emergency? He asked and further indicated that “Let us define it very carefully and make clear the conditions under which the rules can be breached.”
Answering a question as to why the Act is being revised instead of an entirely new one being introduced, when he was addressing the 112th Monetary Policy Committee (MPC) press conference in Accra on Monday, May 22, he said “If you look at the current Act, remember they tried to improve on it in 2016 but there were still inconsistencies and difficulties with implementation.
“First is the issue of when you talk about 5 percent measurement, is it a stock measurement? At any time the central bank has claims on the government from 20 years ago so is it that we have a stock claim of 5 percent of the previous year’s revenue or is it the flow starting from a particular period of time?
“How are you going to access that flow relative to the previous year’s revenue of 5 percent? So there are measurement issues there that need to be clarified.”
He added “There is the issue of emergency. What do you call an emergency? Let us define it very carefully and to make it clear the conditions under which the rules can be breached.
“Then even procedural issues in the law are not very clear. Who does the reporting to Parliament? Is it the Governor or the Minister of Finance? All of these issues have to be clarified. In any case, in the Bank of Ghana, most of our reporting to Parliament is done through the Ministry of Finance so the Governor doesn’t have really direct reporting obligations to Parliament. For me, it is not very clear so all of those issues have to be properly clarified in the law.
“I believe that there is the need for those but even if you have the most perfect law, what happened in 2022 would not have been different because the choice would have been either to grind the entire economy to a halt, allow government operations to come to a standstill which is worst than the problem itself so the issue of the law is fine but in an economic crisis things have to be done differently”
He reiterated: “it is important to clarify things in the act so they are very clear. Measurement issues, procedural issues and all of that. I think that that is the position of the Bank, we need to improve it to make these things a little clearer.”
The International Monetary Fund (IMF) had indicated that the Bank of Ghana Act would be revised.
This is to, among other things strengthen the independence and mitigate fiscal dominance by the government.
The Fund said the amendments to the Act would lead to mechanisms to monitor and enforce compliance, and a clear definition of emergency situations under which the limit can be temporarily lifted.
“Pending legislative changes, the BoG and the Ministry of Finance signed an MoU (prior action) to eliminate monetary financing during the programme. An ongoing updated Safeguards Assessment will provide additional support for designing changes to the BoG Act” the FInd said in is report on Ghana.
