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Adongo goes to court over GH¢2bn govt sovereign guarantee

Mr Isaac Adongo, the Member of Parliament for Bolga Central has sued the government over attempts to use a GH¢2billion sovereign guarantee to underwrite investment of a state institution in some local banks.

According to him, the arrangement violates the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) which prohibits debt-financing of the capital of banks in Ghana.

The plaintiff joined the Attorney General, Ghana Amalgamated Trust Limited and National Trust Holding Co. Ltd to the writ as defendants.

The lawmaker said in his statement of claim that the sovereign guarantee procured from the government of Ghana would be used by the Trust to underwrite 70 per cent of the investment of the Trust in the shares of Agriculture Development Bank (adb), Prudential Bank, Universal Merchant Bank (UMB) and BSIC/Omni Bank up to GH¢780 million at an interest rate of 21 per cent per annum.  

In the writ filed at the Accra High Court by his counsel, Dr Dominic Akurutinga Ayine, Mr Adongo said on March 5, 2019 the government through the Minister of Finance laid before Parliament a request for the issuance of a sovereign guarantee of GH¢2billion in favour of the Ghana Amalgated Trust Limited.

The plaintiff averred that the Trust which intends to issue debt instruments in the domestic market, requires the sovereign guarantee to support its effort to raise funds in the debt market which funds would be used to purchase shares in selected indigenous banks.

The Bolga Central legislator averred that the sovereign guarantee procured from the government of Ghana would be used by the Trust to underwrite 100 per cent of the investment of the Trust in the shares of the National Investment Bank of GH¢1.14 billion at an interest rate of 21 per cent per annum.

By this arrangement, the plaintiff argued that the Trust and indirectly the government of Ghana intend to borrow from the debt market to finance selected banks to meet minimum capital requirements imposed by the Bank of Ghana.

Consequently, Mr Adongo asked for a declaration that the agreements and  arrangements between the Trust and each of the selected local banks whereby the Trust purports to use borrowed funds to purchase the shares of each of the banks contravenes section 9(d) of the Banks and Specialised Deposit-Taking Institutions Act, 2016(Act 930).

The plaintiff further asked the court to declare that the purported approval of the request of the Minister of Finance for the issuance of a GH¢2 billion sovereign guarantee to support the borrowing of funds in the debt market by the Trust to enable it purchase shares in the selected local banks does not serve to cure the breach of the Banks and Specialised Deposit-Taking Institutions Act, 2016(Act930).

The lawmaker prayed the court for a perpetual injunction against the defendants jointly and severally from proceeding in any manner whatsoever to execute or put into effect the investment agreements between the Trust and each of the selected local banks.

BY MALIK SULLEMANA

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