The Government of Ghana is making efforts to address the persistent structural weakness in fiscal formulation that relates especially to commitment control and contracts to ensure effective fiscal discipline in the management of public resources.
Mr Seth Emmanuel Terkper, the Minister of Finance and Economic Planning, said part of the efforts was the introduction of the Public Financial Management (PFM) Act, which also makes provision for new policy measures regarding borrowing and debt management among others.
Briefing members of the Parliamentary Press Corp and the Institute of Financial and Economic Journalists (IFEJ), on the Act, in Accra, on Tuesday, Mr Terkper said for the first time, the Government has provided a comprehensive, legislative framework to the operations of the entire public sector, which includes central government, local authorities, statutory funds and State Owned Enterprises.
The PFM Act, which replaces the Financial Administration Act (FAA) of 2003 and its Amendments and the Loans Act was passed into law by Parliament on August 3, 2016 of 1970.
The PFM Act has 104 sections and the provisions include general responsibility, Powers of Minister, Responsibilities of Chief Director, Duties of a Principal Spending Officer and Salary Negotiations in the Public Sector.
Other provisions are Salary Negotiations for Public Sector, Performance Report by a Covered Entity, Framework for effective risk management from public corporations and state owned enterprises, Creation of Sinking Fund and Establishment of Audit Committees and Offences and Penalties among others.
“This Act is a key step in the move towards comprehensive and general government reporting and establishes government’s commitment to meet good economic governance requirements,“ Mr Terkper said.
Ms Eva Mends, Chief Economic Officer and Group Head of PFM, said the provision in the new law mandates local government authority, a public corporation or a SOE to borrow be in accordance with the Act by seeking approval from the Ministry of Finance before going ahead to take new loans.
The approval is to give the ministry the opportunity to determine the risk level and ability of the borrowing institution to repay.
Mr Patrick Nomo, the Acting Chief Director of the Ministry of Finance, passage of the new law is expected to provide government with the opportunity to codify some good practices introduced and evolved as part of the PFM Reform Implementation.
He said the Act will underpin Ghana’s ongoing reforms designed to address persistent weaknesses and promote fiscal discipline, transparency and accountability; and will help improve credibility of the budget, the predictability during budget execution, strengthen expenditure controls and reduce cash rationing, all of which contribute to improving the overall financial management of the public sector.