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A most important trend around the world in recent times is the
decentralization of financial responsibilities to Metropolitan,
Municipal and District Authorities [MMDAs]. This has resulted in
new challenges for local authorities since they now have the
responsibility of financing and managing municipal services and
capital infrastructure.
In Ghana today, the task has become even more complicated with
the implementation of the policy of decentralization of the
creation of the MMDAs. Domestic (internally generated) revenue
mobilization has become weak due to several reasons including
over-reliance on Central Government transfers. The need for
District Assemblies to find practical ways to increase domestic
resource mobilization and also to tap into local capital markets
to finance their urban development is more crucial now than
ever.
Last year,
the Ministry of Local Government, Rural Development and
Environment (MLGRDE) and
Ministry of Finance and Economic
Planning organized a two-day international conference on
“Municipal Finance and Management Initiative” in Accra. The
conference was organized in conjunction with key stakeholders in
the public and private financial institutions, and local
government system as part of efforts to ensure availability of
adequate and sustainable resources for funding (urban)
infrastructure, service delivery and development projects.
The conference brought into fruition the Ghana Municipal Finance
and Management Initiative (MFMI). The MFMI is a new endeavor by
the Government of Ghana, with the Ministries of Finance and
Economic Planning and the Local Government, Rural Development
and Environment playing the lead role.
The main aim of the Municipal Finance and Management Initiative
is to assist the MMDAs to achieve the following:
-
Significantly increase Internally Generated Funds (IGF)
-
Identify and find ways of minimizing and finally eliminating
financial leakages
-
Significantly improve management and accounting systems
-
Raise necessary funds to meet infrastructural and service
delivery requirements
-
Gain public confidence.
Ultimately the initiative seeks to empower the Local Authorities
to attract funds from the capital market.
In order to translate the conference results into practice, a
National Technical Advisory Committee was formed. Four (4)
subcommittees were created under the technical advisory
committee to work out the modalities to realize and
operationalize several aspects of the Initiative. These were:
a) Legal and Regulatory Framework,
b) Fiscal and Financial Instruments,
c) Capacity Building, and
d) Pilot Project sub-committees
The sub-committees completed their activities within a period of
seven months ending October, 2006 and followed it up by writing
their individual reports. These reports were collated into a single
document and formed the basis of the Draft Local Government Finance
bill. The draft bill is to be submitted through cabinet for
consideration for onward transmission to Parliament for passage
into law. Thus a clear cut process for MMDAs to generate income
and borrow money under relatively flexible but responsible
conditions for the financing of municipal infrastructure and
service delivery is established.
The bill establishes a Municipal Finance Authority
with a mandate to mobilize resources from both internal and
external sources, channel them into productive infrastructure
development and manage risk. This includes the transfer of
expertise to Assemblies in order to contribute to the rapid
economic growth and poverty reduction in the country. Prior to
the submission of the draft bill to Cabinet, sensitization
workshops were held for the political leadership,
parliamentary select committees, national think-tanks and
financial sector stakeholders to solicit views to enrich the
bill. The sensitization workshops are being concluded with the
Local Authorities. Major recommendations from these consultations
include the need to solicit the views of all stakeholders by broadening the
base of the consultation process.
The MFMI aims at improving the revenue and financing strategies
of the MMDAs by linking them to the financial market. To further
advance the course of the MFMI a high powered steering committee
consisting of key stakeholders was set up and was
inaugurated by the Vice- President of the Republic of Ghana, Alhaji Aliu Mahama on the 6th of June, 2007. To emphasize the
importance the Government of Ghana attaches to the initiative,
the steering committee is being co-chaired by the Deputy
Minister of Finance and Economic Planning and the Deputy Minister for Local Government, Rural Development and
Environment. The main terms of reference for the committee is to
take oversight responsibility for the successful implementation
of the Initiative. Further, a secretariat made up of a team of
specialists has been established for effective execution of
day-to-day tasks and an agreed road map.
It is envisaged that the benefits which shall
accrue to the country from this initiative are enormous including:
-
Improving Local Governments’ access to credit for accelerated
provision of public services and economic development in the
regions;
-
Reduced risk and lower costs of borrowing for the Local
Governments;
-
Supporting improved financial and technical management of the
Local Governments;
-
Provision of a focus for our development partners who wish to
support infrastructure development; and
-
Fostering cooperation amongst a variety of local governments as
well as between local governments and private institutions.
Ghana has come a long way in its decentralization system.
It is believed that a smooth take-off of the MFMI
project would pave the way for increased revenue generation and
mobilization on the part of municipalities in Ghana. A critical
component of the success of the programme is the opportunity for
MMDAs to access the capital market through the issuance of
municipal bonds as contained in the proposed Local Government
Finance Bill with its accompanying memorandum.
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