Ministry prepares 2 bills for Cabinet

Page 3, Feb. 16/2008

Story: Charles Benoni Okine

THE Ministry of Local Government, Rural Development and Environment has prepared for the consideration of Cabinet two bills that will allow, for the first time, the various metropolitan, municipal and district assemblies (MMDAs) to directly source long-term credit from outside to support their development agendas.
They are the Local Government Finance Act and the Municipal Finance Authority Act which, together with the establishment of a financing authority, will help MMDAs to access long-term capital for infrastructural investment and improved service delivery.
The Deputy Minister of the Ministry of Local Government, Rural Development and Environment, Mr Maxwell Kofi Jumah, announced this at the weekend when he signed a memorandum of understanding (MOU) on behalf of the government with Cities Alliance, a global coalition of cities and their development partners committed to scaling up successful approaches to poverty reduction in Accra.
Present to witness the ceremony was a Deputy Minister of Finance and Economic Planning, Professor George Gyan-Baffuor.
The bills, when passed, are also expected to help to reduce risk and lower the cost of borrowing for the MMDAs, provide a focal point for the development partners who wish to support infrastructural development, as well as ensure credible co-operation among a variety of local government authorities.
According to Mr Jumah, the over-reliance on the government for funds for the various assemblies to embark on development projects in their areas was not enough to achieve the needed results.
“Getting the assemblies to go out there to borrow money for their projects is a laudable one and it will help them to develop faster,” he said.
Presently, the Constitution debars the assemblies from borrowing funds for development from any source, which means that the District Assemblies Common Fund (DACF) continues to remain the only source of funds for development.
Each year, 7.5 per cent of the total Gross Domestic Product (GDP) of the country is disbursed to the various MMDAs to enable them to embark on projects for the people.
But Mr Jumah said the state allocation, which was not enough, considering the magnitude of projects that each assembly needed, also delayed most of the time, leaving projects uncompleted.
“Undoubtedly, the country has achieved significant political and administrative decentralisation, as well as decentralised planning,” he said.
However, fiscal decentralisation had remained an unyielding component of the process, he said.
“In this regard, this government has made significant efforts at strengthening local government finance and diversifying financing methods through reforming taxation and expenditure systems, reshaping inter-governmental transfers and privatising key projects,” he added.
Professor Gyan-Baffuor noted that when the bills were passed, the assemblies needed to be cautious to ensure that the money they borrowed was used judiciously for projects that would yield positive returns to defray the debt.
“We would not want a situation where the debt from the assemblies would be a national burden since, in the long term, it would be added to the total national debt stock,” he said.
Professor Gyan-Baffuor, therefore, advised Cities Alliance to ensure that when any approaches were made to it by the assemblies, a proper scrutiny of the proposals would be done to ensure that the projects had got the necessary returns to defray the debt.
Mr Kevin Milroy, Senior Operations Officer of Cities Alliance, said the alliance was committed to ensuring that what it had signed worked in the interest of all parties.