NPP Caucus insists gov’t misapplied Eurobond

Dr-Anthony-Akoto-OseiThe Minority New Patriotic Party (NPP) Caucus in Parliament has insisted that, the government misapplied the US$1 billion sovereign bond it raised from the European Bond Market.

According to the Minority, instead of using the bond inflows, which translated into approximately GH¢3 billion, for the purpose for which it was issued, the government has rather used the amount to reduce its indebtedness to the Bank of Ghana (BOG).

The Minority Spokesperson on Finance, Dr. Anthony Akoto Osei, who made the allegations yesterday at a news conference, said once the Eurobond proceeds has been used to repay the government’s indebtedness at the BoG, they would no longer be available for the capital expenditure for which the funds were secured.

He said according to the Minister of Finance and his deputies, the intended purposes as listed in the prospectus were to fund the Investment Infrastructure Fund, to pay for infrastructural development that the government had prioritised, including the Kasoa Interchange, the Kwame Nkrumah Interchange, and the Pologround bypass, among others.

“The Minister of Finance further muddied the waters by stating that some US$800 million of the funds were sitting intact in a bank account in New York. Furthermore, government has claimed that the Eurobond proceeds arrived too late to be accounted for in the 2015 budget,” he said.

Dr. Akoto Osei said the explanations offered by the government so far, did not represent the truth, because the BoG Monetary Account for 2014 had revealed that the sovereign bond had rather been used to reduce the government’s indebtedness to the Central Bank and not applied for the purposes for which the funds were borrowed.

He explained that data from the BoG indicated that the bank’s net credit to the government increased from GH¢5.3 billion at the end of December last year to GH¢10.6 billion in August, this year, representing an increase of about 100 per cent.

This massive extension of credit to the government by the BoG, represented a breach of the BoG Act 2002 (S.30 (2) which stipulates that the BoG cannot extend credit to government in excess of 10 per cent of government’s tax revenue for the year.

“The cedi counterpart of the Eurobond inflow of US$1 billion into government’s account at the BoG can be seen in the net credit to government’s line of the monetary account. This indicates that the outstanding BoG credit to government was simultaneously reduced from GH¢10.6 billion in August 2014 to GH¢7.3 billion in September 2014,” he said.

He said the sovereign bond proceeds had therefore been fully reflected in the government’s position at the BoG, and used to reduce government’s indebtedness to the BoG such that the central bank could comply with Section 30 of the BoG Act.

“By this action, Ghanaians would be deprived of the benefits of much needed development of the investment of the sovereign bond proceeds in capital projects, while facing the additional burden of repaying the debts,” he said, and urged Parliament to immediately institute an inquiry into the matter.

Earlier last week, the government explained that it was using the $1 billion  proceeds from a Eurobond sale in September judiciously, contrary to allegations that the money had been used to pay debts incurred by the central bank.

According to a Deputy Finance Minister, Cassiel Ato Forson, not all the $1 billion had even been spent on earmarked projects, but were used judiciously.

“What we said is that, we are going to use $250 million for capital expenditure and to take another $300 million for counterpart and matching funds, and also use $200 million for maturing short term debts”, said Ato Forson.

He further assured that at the appropriate time, Parliament would be briefed fully on how all the funds had been utilised.

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