Vice President Alhaji Aliu Mahama expressed concern about the inability of the country's local government entities to have direct access to long-term credit markets.
He therefore suggested the need for considerable efforts to develop the financial infrastructure necessary to bring these entities to the market place.
Vice President Mahama expressed these views when he inaugurated a 16-member Steering Committee of the Municipal Finance and Management Initiative in Accra.
The Committee which is co-chaired by Mr Abraham Odoom, Deputy Minister, Local Government, Rural Development and Environment and Professor George Gyan Baffour, Deputy Minister of Finance and Economic Planning is aimed at improving local government's access to credit for accelerated provision of public services and economic development and reduce risk and lower costs of borrowing.
Vice President Mahama said increase in the flow of private funding for the Metropolitan, Municipal and District Assemblies (MMDAs) would be realised through specialised commercially viable and well-capitalised financial intermediaries that could independently mobilise long-term debt on private markets for on-lending for priority local infrastructure investments.
"Lessons around the world suggest that the investment components of such Special Financial Intermediaries (SFIs) have been largely successful. They meet fiscal targets and add to the capacity of municipal infrastructure whilst helping MMDAs to build a sound credit record."
Vice President Mahama proposed that the SFIs for the MMDAs should be institutions, which can be able to raise long-term resources on private credit markets and operate in a financially sustainable manner.
"In addition, SFIs and municipal bond markets should play complementary roles in meeting local demand for long term credits.
"They should therefore offer alternative options in financing MMDAs even though their needs and capabilities vary in line with their economic size and resource base."
Mr. Kwadwo Baah-Wiredu, Minister of Finance and Economic Planning said the initiative would empower the MMDAs to access private capital to accelerate infrastructural development and service delivery.
He said it would also improve the financial and technical management of local governments.
Mr. Baah-Wiredu appealed to the country's development partners to assist in the development of the rural economy by supporting the Municipal Finance Authority.
Mr. Stephen Asamoah Boateng, Minister of Local Government, Rural Development and Environment said the rapid urbanisation the country was undertaking, reinforced the need to improve the often poorly maintained, infrastructure and to meet new demand for housing, education, water supply, sanitation, sewerage treatment and disposal, solid waste management and public transport.
"This requires massive investments, much of which should be financed, co-financed or guaranteed by local governments."
Mr. Asamoah said government was committed to deepen the financial base of the local governments by developing and building a formidable Local Government Credit market and assisting them in accessing long-term credits.
This will call for the enactment of Local Government Finance Act and establishment of a Financing Authority to assist local governments to access debt markets for infrastructural investments.
Dr Esther Offei, Director of the Institute of Local Government Studies, called for an effective municipal financing, which is vital to facilitate an efficient and effective delivery of services of local authorities and local economic development.
Mr. Kwame Pianim, Chief Executive Officer of New World Investments Limited and a member of the initiative, who chaired the function, said Ghana's economy was at a critical stage that called for infrastructural development to facilitate the process.