The Institute of Economic Affairs (IEA) has proposed extending the tenure of the Governor of the Bank of Ghana beyond the terms of the country’s presidents.
This recommendation is part of several major proposals aimed at reviewing the Bank’s Act to enhance transparency, accountability, and effectiveness.
The IEA asserts that although the Central Bank plays a significant role in the economy, with a mandate to ensure price and financial stability and support the Government’s economic policies, its performance has fallen short in several respects in recent years. This has led to price volatilities, with inflation remaining high and well above the Bank’s own targets.
Act responsible for deficiencies in BoG’s operations
According to the IEA, the deficiencies in the Bank’s operations and performance can largely be traced to loopholes in its Act.
The IEA’s initial assessment of the current BoG Act, informed by best practices from the Bank of England and the Federal Reserve Acts, identified several loopholes that need addressing to improve the Bank’s effectiveness in fulfilling its mandate.
Changes to board of Directors appointment
Among the proposed amendments are changes to the appointment of the Board of Directors of the Bank, the appointments and tenure of the Governor and Deputy Governor, and the determination of their allowances.
BoG Governor’s tenure should extend beyond presidential terms
Head of Research at IEA, Dr. John Kwakye, who led a consultative forum, proposed that the Governor’s tenure in office should extend beyond presidential terms.
He explained that aligning Governors’ terms with presidential terms often leads to new Presidents replacing Governors at will.
Two terms of 5 years each and parliamentary approval
The proposed amendments suggest that the President should appoint the Governor of the Bank for a maximum of two periods of five years each, subject to Parliamentary approval.
This measure ensures that the Governor’s tenure does not align with that of the Executive, following the practices of the Federal Reserve and the Bank of England.
Similarly, the President should appoint two Deputy Governors of the Bank, each for a maximum of two periods of five years, also subject to Parliamentary approval.
Qualifications of Governor, Deputies
The Governor and the two Deputy Governors must possess recognized experience in economics, finance, accounting, or banking.
This requirement ensures that those appointed to these critical positions have the necessary expertise to effectively oversee the Bank’s operations and policies.
Parliament to determine terms and conditions
Furthermore, the terms and conditions of the appointments for the Governor and the two Deputy Governors should be determined by Parliament, rather than the Government, to safeguard their independence and prevent any undermining of their positions.
This separation of appointment conditions from government influence is crucial for maintaining the autonomy of the Bank’s leadership.
Additionally, the President appoints nine non-executive directors of the Board in consultation with the Council of State, as per Article 70(1) of the Constitution.
Governors, Non-Executive Directors to appear before Parliament
The IEA also recommends that non-executive directors, like the Governors of the Central Bank, should regularly appear before the Finance Committee of Parliament.
This would allow them to present their perspectives on the Bank’s performance to Parliament, promoting transparency and accountability.
Prof. Alexander Bilson Darku, a senior fellow at the Institute of Economic Affairs, stated, “The forum is part of the IEA’s agenda to contribute to the transformation agenda of the nation. As much as we look at the real sector and propose some recommendations, we also look at the core implementation of policies and see what we can propose to enable the economy to achieve stability.”
Independence of the Central Bank
He emphasized that the proposals aim to ensure the independence of the Central Bank in promoting price and exchange stability and conducting policies that would promote economic development.
“The Bank of Ghana will become more effective in promoting price stability in the economy, which would, in turn, support other government policies to promote economic development in the country. To achieve that, we must amend the Act,” he concluded.
