Finance Lawyer Jonathan Sitsofe Kofi Amable has expressed concern over the absence of parliamentary approval for government borrowing through the issuance of domestic debt securities.
He asserts that lending to the government through the issuance of treasury bills, bonds, and other domestic debt instruments issued to the Bank of Ghana without parliamentary approval of the legal and commercial terms of these borrowings hinders the growth of the capital market.
According to Mr Amable, Article 181 (3), (4) and (6) of the 1992 Constitution of Ghana stipulates that the terms of all forms of government borrowing must be approved by Parliament before the loans can come into effect.
In an interview on Citi TV’s The Point of View, the Finance Lawyer underscored the importance of these constitutional restrictions on loans raised by the Government and highlighted that section 61 of the Public Financial Management Act, 2016 (Act 921) and section 30 of the Bank of Ghana Act, 2002 (Act 612) need to be repealed because they breach the requirements of article 181 of the Constitution.
“What we’re doing is we’re seeking for the court to enforce Article 181 to require that lending to the government through the issuance of domestic debt securities. Be it treasury bills or bonds must be done subject to parliamentary approval of the terms and conditions of the transactions. Lending by the BoG to the government under the BoG Act is also done that way.
“The relevance of provisions of these Acts which fly in the face of the constitution of parliament should be struck down. These are the things we are seeking, and they are quite important because in my practice as a finance lawyer, we have realised that these things at the end of the day, especially when it comes to the capital market prevent it from being deepened and developed,” he told host Bernard Avle.
The Finance Lawyer noted that having external control on government borrowing could be an effective solution to reduce the crowding out of the private sector because parliamentary control could lead to lower interest rates, which would enable corporate institutions to compete with treasury instruments in the capital and money markets.
“No matter how attractive an investment is, and we’re talking about low productivity and economic growth, and you need the private sector to grow. The private sector needs access to capital to be able to do that. And if banking rates are high in the traditional banking sector, the various corporate institutions also have recourse to the capital market.
“One thing that inhibits the growth of our capital market is this issue of the government crowding out because if you have a corporate institution that is seeking funds and comes to the market, everybody is looking at the risk involved.
“And what are the returns I can get if I’m lending on government bonds, treasury bills? Back then the problem had to do with the bond, now with the DDEP, coupons on the bonds are lowered and the focus is on the treasury bill which is seen at a high rate.
“If these things are resolved then the rate can be controlled and it will give the private sector more capital so that they can do more, produce more and boost the economic development of the country. That for me is the focus.”
Source:CitiNewsroom
