The Director of Research of the Institute of Economic Affairs (IEA), Dr John Kwakye, has proposed an amendment to the terms and conditions of the service of Board of Directors of the Bank of Ghana so that their allowances will be determined by Parliament to insulate the bank from Executive control.
He said allowing the government to determine the terms and conditions of the Governor and other key officials of the central bank weakened their positions and independence, advocating that the power should rather be given to Parliament.
At the maiden consultative stakeholders forum to review the Bank of Ghana and promote the central bank’s adherence to transparency and accountability in Accra yesterday, Dr Kwakye further proposed that the Bank of Ghana Act should specify the special qualification of Board members, taking cognisance of the nature of central banking business, as well as ensuring a rich blend of professional expertise.
Dr Kwakye explained that while advocating the independence of the central bank to be strengthened, such independence must go hand in hand with transparency and accountability in its operations.
“We, therefore, recommend an oversight body for the bank akin to Bank of England’s Oversight Committee (of the Court),” he stressed. Organised by the IEA, the forum reviewed the Bank of Ghana Act 612 of 2002, and the amendment Act 918 of 2016, and proposed some amendments.
It also discussed management and operational independence, transparency and accountability, objectives of the central bank, monetary policy, fiscal agent role, enforcement and sanctions regime of the bank.
Participants were drawn from the Bank of Ghana, Ministry of Finance, Parliament, the Attorney-General’s Office, the Ghana Bar Association, academia, banking, business, labour unions and civil society organisations.
In attendance were a member of the Council of State, Samuel Okudzeto; former Commissioner of the Commission on Human Rights and on Administrative Justice (CHRAJ), Francis Emile Short, and a Senior Fellow of the IEA, Prof. Alexander Bilson Darku.
Mandate
On the appointment of the Governor and Deputy Governors and their tenure, Dr Kwakye pointed out that “it has been the practice that Governors’ terms have been coterminous with presidential terms. This situation is often abused by succeeding Presidents to replace Governors at will. Ideally, the Governors’ tenure should extend across presidential terms”.
Speaking to the mandate of the central bank as amended by Section 2 of the Bank of Ghana (Amendment) Act 918 of 2016, the IEA Director indicated that there was no need for an amendment to the Act because the Act and the Constitution gave the bank a broad mandate that was not limited to just price stability as was often said, but a mandate that also included a development role.
Dr Kwakye said the appointment of the governors to the central bank, in addition to nine other non-executive directors to the board in consultation with the Council of State in accordance with Article 70(1) of the 1992 Constitution, meant the entire board was appointed by the Executive arm of government.
This system of appointment of the board members, Dr Kwakye observed, increased the influence of the Executive on the bank’s governance structure. He suggested that in international best practices, it was required that the appointment of the (non-executive) directors, including the representative of the Ministry of Finance, was subject to approval by the independent Parliament, and not the pseudo-executive Council of State.
He said it was also important that professional qualifications relevant to the functions of the central bank such as economics, finance, banking and law were considered.
Government debt market
He said given that lending by Bank of Ghana to government represented the most inflationary source of financing the budget, such lending should be restricted, stressing that the limit of five per cent was appropriate.
However, he explained that it should be strictly monitored by Parliament. The decision to exceed the limit in case of emergency, as well as the timeline to return to the limit should be made by the Governor, Minister and Parliament.
Caution
Mr Okudzeto, for his part, cautioned that care must be taken not to arrogate too much responsibilities or powers to Parliament because the institution has its own challenges.
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