Minority in Parliament questions government over Eurobond
Ghana’s Minority in Parliament on Tuesday dared government to produce evidence on the use of the one billion Eurobond secured from the International Capital Market last September.
Alleging misappropriation, the Minority Caucus said it had evidence that government used the proceeds to pay debts owed to the Bank of Ghana, rather than financing of named infrastructure projects.
At a press conference in Accra, the Minority New Patriotic Party (NPP), urged government to come clean on the Eurobond issue.
Dr Anthony Akoto Osei, the Ranking Member on the Finance Committee and MP for Old Tafo, who echoed the concerns of the Caucus, accused government of being inconsistent with the prospectus underpinning the bond issue.
Dr Osei recalled that government in 2013 borrowed one billion dollars, and another one billion dollars this year, from the International Capital Market, and indicated to Ghanaians and the investors that, proceeds from the bond would be invested in capital projects.
However, the utilization of the proceeds is now a controversial issue, as it is not clear to some Ghanaians how the money has been spent, Dr Osei noted, and called for the details of the bond to be published.
He said a report indicates that the Bank of Ghana has used the Eurobond to settle government indebtedness to the Bank.
He called on Parliament to immediately investigate the Bond saga.
Government has earlier explained that proceeds from the Bond were used for the intended purposes, and indicated in the prospectus of the bond.
The money, according to government, was used to fund investment infrastructure, such as the Kasoa By-pass, the Kwame Nkrumah Interchange, the Polo Ground By-pass, and the Ayanfuri road, among others, but the Minority is of the view that government lied when it said the money was used to finance on-going capital projects.
Dr Osei said evidence from the Bank of Ghana’s monthly monetary survey, reveals that the money was absorbed by the Bank to settle part of government’s indebtedness.
He challenged government to provide details on what the Eurobond was used for.
The controversy about the one billion Eurobond saga was triggered by Dr Mahamudu Bawumia, running-mate of the NPP flagbearer, Nana Akufo-Addo, who at a breakfast meeting with UK-based Ghanaian professionals in London, said proceeds from the bonds have been misappropriated.
However, the allegation has been dismissed by officials at the Finance Ministry.
Government spokespersons said part of the Eurobond cash was disbursed for the construction of the Kasoa by-pass, as well as the Kwame Nkrumah Circle project in Accra.
But the Minority says it has incontrovertible evidence to support the claim that the one billion-dollar eurobond cash was used to retire debts owed to the bank of Ghana.
Dr Osei said the bond was oversubscribed, because of the capital investment government promised it was going to use the money for, only for it to turn around to use it to pay debts.
He said some of the projects the government claimed it used the money for, date back to 2010, and wondered how monies raised in September 2014 could have been used to fund those projects.
The Ranking Member, a Monetary Economist, said there is even a bigger controversy raging between the President and the Governor of the Bank of Ghana, on the same matter.
According to him, President John Mahama had given a directive to the Governor not to absorb the one billion Eurobond cash, but the Governor, Dr. Kofi Wampah, had no choice but to “swallow” the money.
He explained that the Bank of Ghana had exceeded its debt threshold which was in flagrant violation of the law setting up the Bank, so the Governor had to reduce the debt with the revenue from the Eurobond.
Deputy Minority Leader, Dominic Nitiwul who was also at the press conference, said the governor was torn between the devil and the deep blue sea, and had to take a decision to use the money to settle government’s ballooning debts
The Minority said the explanations given so far by government do not represent the truth.
“Unfortunately, the evidence available shows quite clearly that the explanations offered by Government so far do not represent the truth. The Bank of Ghana’s Monetary Accounts for 2014 reveals the true picture, which is that the sovereign bond has rather been used to reduce Government indebtedness to the Central Bank and not applied for the purpose for which the funds were borrowed,” the Minority said.
“The data from the Bank of Ghana shows that Bank of Ghana net credit to Government increased from some GH₵5.3billion at the end of December 2013, to GH₵10.6billion by August 2014, representing an increase of 100% (GH₵5.3billion). This massive extension of credit to the Government by the Bank of Ghana represented a breach of the Bank of Ghana Act, 2002 (S.30 (2) and the criterion established by the six countries in the West Africa Monetary Zone, both of which stipulate that the Bank of Ghana cannot extend credit to Government in excess of 10% of Government’s tax revenue for the year.
“The Cedi counterpart of the Eurobond inflow of US$1billion into government account at the Bank of Ghana can be seen in the net credit to government line of the Monetary Account. This indicates that outstanding Bank of Ghana credit to government was simultaneously reduced from GH₵10.6billion in August 2014 to GH₵7.3billion in September 2014. The sovereign bond proceeds have therefore been fully reflected in government position at the Bank of Ghana and used to reduce government indebtedness to the Bank of Ghana such that the Bank of Ghana can comply with S.30 of the Bank of Ghana Act”, Dr Osei told the journalists.