Municipal Finance Bill now apt - GSE boss

The increase in the maximum tenor of government bonds from three to seven years should incentivise passage of the Municipal Finance bill, Managing Director of the Ghana Stock Exchange (GSE) Kofi Yamoah has said.

The bill was primarily drafted to strengthen Metropolitan, Municipal and District Assemblies’ (MMDAs) ability to access finance for infrastructural development at the grasssoots.

The bill, which proposes the creation of a Municipal Finance Authority, was laid in parliament in 2008 to complement the Municipal Finance and Management Initiative (MFMI) of the government at the time.

It was subsequently referred to the National Bond Market Committee (NBMC) to address various challenges that stalled its passage.

“It’s under the National Bond Market Committee, in terms of interest rates, in terms of municipal bonds and making the environment much more conducive not only to government but to corporate entities to access this market,” Mr. Yamoah said.

“It is an on-going process. Once interest rates come down and once government bonds move from three years to five or seven years -- and now we’re seeing seven years -- then we believe that there will be a lot more space for corporations to access this market.”

A strong regulatory framework that prevents MMDAs from engaging in multiple borrowing and running into debt -- which will ultimately be passed on to the central government -- and the ability of MMDAs to identify and invest in revenue-generating projects are the major challenges being addressed by the NBMC.

The Securities and Exchange Commission (SEC), which has been pushing for the re-visitation of the bill, says though there are genuine concerns, piloting the programme will be apt.

“Though there is a genuine concern about the management of funds, we think that we could pilot it. Just give one or two, or a maximum four, and let them start. I don’t see why if Accra wants to issue bonds to build some shopping mall or market, they should not be able to generate enough funds to pay,” Mr. Adu Anane Antwi, Director-General of SEC, said.

“Accra, Tema, Takoradi, and Kumasi are municipalities whose projects can easily pay for themselves,” he added.

The increasing demand on central government’s scarce resources has necessitated the need for MMDAs to consider alternative sources of funds for infrastructure projects.