The Institute of Economic Affairs (IEA) is initiating moves toward a broad, comprehensive stakeholder review of the Bank of Ghana (BoG) Act with a goal of bolstering the Bank’s effectiveness and operational independence.
At the preliminary stakeholder forum in Accra convened by the Institute, several key areas for reform aiming to enhance the central bank’s ability to maintain price stability, ensure robust financial sector oversight and manage economic crises more effectively were highlighted.
Deficiencies in the Bank’s operations and performance are in many ways traceable to loopholes in its Act, the Institute notes.
An initial desk assessment of the Act identified several loopholes that need to be addressed to promote, in particular, the Bank’s transparency, accountability and effectiveness. In its assessment, the IEA drew on best practices from the Bank of England and Federal Reserve Acts.
IEA’s Director of Research, Dr. John Kwakye, said the Bank of Ghana Act’s assessment will form the basis for a review of the Act in consultation with a cross-section of stakeholders.
Central to proposed reforms is the call for a clearly-defined primary mandate for the BoG, with an emphasis on price stability.
The review underscored the importance of operational independence from political influences, suggesting measures to insulate the Bank from undue interference while simultaneously enhancing its accountability mechanisms.
The preliminary review recommended significant changes to BoG’s governance structure. Key proposals include strengthening the board of directors’ role and ensuring transparency in their decision-making processes.
Also, in response to evolving economic dynamics, the review proposed modernising BoG’s monetary policy framework.
This includes incorporating financial stability into the monetary policy mandate and developing new tools and instruments for effective policy implementation. These changes are expected to better equip the Bank to respond to economic changes and challenges.
Initial recommendations included strengthening BoG’s role in financial sector oversight and improving coordination with other regulatory bodies.
The review suggested establishing a financial stability fund or similar mechanisms to address systemic risks. Enhancing BoG’s capacity to act swiftly and effectively during financial crises is highlighted as a key area for reform.
