The government of Ghana is in no doubt demonstrating its commitment and determination to avoid the ‘sins’ of the past in the management of her economy.
In order to avert the possibilities of getting back to the path of the fiscal slippages that caused the country to seek policy credibility from the IMF in the year 2015 through the Extended Credit Facility (EFC), the government of President Akufo-Addo has passed the historic Fiscal Responsibility Act, to anchor fiscal discipline and ensure prudence in the management of the economy. The Act establishes both the Fiscal Council and Financial Stability Council.
The Fiscal Council will amongst other responsibilities develop and recommend policies for the maintenance of prudent and sustainable levels of public debt, ensuring that the fiscal balance is maintained at a sustainable level and the management of fiscal risks in a prudent manner, to achieve efficiency, effectiveness and value for money in public expenditure.
The Fiscal Council will also monitor the performance of the government budget with regards to compliance with fiscal rules and targets. These include:
• a budget deficit of not more than 5% of GDP (as provided by law)
• a positive primary balance (as provided by law) and
• a debt to GDP ratio of not more than 65% of GDP
Ghana becomes the only country in sub-Saharan Africa to establish a Fiscal Council. The Fiscal Council will be chaired by Dr. Paul Acquah, former Governor of the Bank of Ghana and former Deputy Director of the Africa Department of the International Monetary Fund (IMF). Other members of Ghana’s Fiscal Council are Professor Eugenia Amporfu, Dr. Nii Noi Ashong, Professor Augustine Fosu, Dr. Nii Kwaku Sowa, Professor Robert Osei, and Mr. Ali Nakyea.
Additionally, to enhance the stability and soundness of the financial system, the President, Nana Addo Dankwa Akufo-Addo has by Executive Instrument, established a Financial Stability Council.
The role of the Financial Stability council is to amongst others: strengthen and reinforce the stability of the financial sector, acting as an inter-institutional consultative coordination body; Coordinate regulation and supervision at the micro-level by focusing on matters of common concern for the various financial regulators involved in the regulation and supervision of financial entities in Ghana, namely Bank of Ghana (BoG), Securities and Exchange Commission (SEC), National Insurance Commission (NIC) and the National Pensions Regulatory Authority (NPRA); and Evaluate and mitigate financial stability risks by focusing on the timely detection and mitigation of risks to the stability of Ghana’s financial system.
It will comprise the Governor of the Bank of Ghana (Chairman), Deputy Governor, Deputy Minister of Finance, CEO of the National Insurance Commission, Director General of the Securities and Exchange Commission, CEO of the National Pensions Regulatory Commission, and CEO of the Ghana Deposit Protection Corporation. Ghana also becomes the second country in sub-Saharan Africa to establish a Financial Stability Council after Mauritius.
Historically, Ghana has persistently had a problem with politicians pursuing a fiscal policy that is inconsistent with macroeconomic stability (especially during election years). The establishment of the Fiscal Council and Financial Stability Council is, therefore, to help tie the hands of politicians in ensuring prudent macroeconomic management.
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