Government to establish Financial Stability Council

Mr. Ofori Atta

Mr. Ofori Atta

A Financial Stability Council (FSC) is to be established to assess the vulnerabilities affecting the performance of the financial industry in the country.

The Minister of Finance, Ken Ofori-Atta who announced this when he presented the budget statement and government economic policy to Parliament last week, said the establishment of the FSC had become necessary due to the overexposure of the banks to the energy sector, which is affecting the financial stability of the banking industry in the country.

He explained that the FSC would have oversight responsibilities over the banks and provide strategies and plans to avert the risks faced by them so as to prevent the collapse of the financial industry in Ghana.

The Finance Minister who presented the maiden budget of the government to Parliament last week on the theme “Sowing the Seeds for Growth and Jobs,” said  a “significant number of banks have  capital adequacy ratios below the required ten per cent even after restructuring of the Volta River Authority  and Tema Oil Refinery debts.”

“Exposure to debts from Bulk Distribution Companies, State Owned energy entities, as well as non-performing private sector loans continues to exert enormous pressure on the banking sector, posing a systemic risk to the entire economy,” Mr Ofori-Atta said.

The previous government last year initiated a move  to pay some banks in the country the $250 million owed them by the e state owned energy companies, which culminated  in the establishment of the Energy Sector Levy by government to raise revenue to retire the energy sector  debts.

The Finance Minister further hinted that the government would soon established a Fiscal Council  to address the long-term fiscal slippages and escalating public debt stock leading to a high risk of debt stress.

That, Mr Ofori-Atta said, was because the country’s fiscal implementation, among others, lacked transparent institutional arrangement for providing quality fiscal quality fiscal information to the public and a mechanism for ensuring accountability in implementing fiscal policies to guarantee the stability of the system.

“The Fiscal Council will contribute to the accountability of government, responsible for setting up medium-term fiscal policy anchors to guide fiscal policy as well as monitor compliance,” he said.

Mr Ofori-Atta said the Public Financial Management Act, 2016; Act 921 would be amended to give legal backing to the Fiscal Council.

The Finance Minister opined that the goal of the government was to build a robust business-friendly and people-centered economy in Africa which would translate into job creation and prosperity for the entire citizenry.

“We will strike the right balance between fiscal consolidation and growth, by making credible policy choices that will create the fiscal space to implement growth enhancing initiatives,” he said.

By Kingsley Asare

 

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