Ghana Returns to Municipal Bonds to Raise Funds for Dev’t Projects

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After abandoning the municipal bonds plan for almost a decade, declining tax revenue, widening budget deficit and the fiscal squeeze at the local assemblies are forcing the Ghanaian government to return to the plan.

The plan which is expected to takeoff next year will provide cheap funds from the capital market to meet the ever-growing infrastructure need of the various Metropolitan, Municipal and District Assemblies (MMDAs) in the country.

The move will enable the Ministry of Finance to source funds for the MMDAs to undertake their own development projects without depending too much on the national budget.

According to the Minister of Finance, Seth Terkper, Accra Metropolitan Assembly and Kumasi Metropolitan Assembly could be the first assemblies to raise through the bonds, while others will follow later.

The decision has been influenced by plans to reduce the burden on government’s finances from assemblies, he added.

“We are working to now to go parliament like all cities do. Cities borrow with bonds, so we are working to go to parliament with this bonds concept which is used to elsewhere,” Mr. Terkper stated.

He insists the Municipal Bonds to be issued on the local stock exchange will enable say the Accra Metropolitan Assembly and the Kumasi Metropolitan Assemble to fund key development projects on their own.

GB&F gathered that the proposed Municipal Finance Authority (MFA) Bill was laid in Parliament in 2008 to complement the Municipal Finance and Management Initiative (MFMI) of Government at the time.

The bill, when passed into law, will facilitate investment in municipal bonds and credits by individuals, companies and capital market entities such as mutual funds and pension funds.

The World Bank estimated that the country’s huge infrastructure deficit requires sustained spending of at least US$2 billion per annum over the next 10 years to address the deficit.
GB&F

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