Government has denied claims it caused financial loss to the state by transferring some $250 million Eurobond proceeds from the Central Bank into a private bank.
Finance Minister Seth Terkper said the actual amount transferred was not 250 million as claimed by the NPP Vice-Presidential candidate, Dr. Mahamudu Bawumia.
Dr. Bawumia had told students of the Accra Polytechnics that the government transferred part of a Eurobond loan into a private bank.
The money had been set aside for purposes of establishing the Ghana Infrastructure Investment Fund (GIIF) and was lodged at the Bank of Ghana.
Dr. Bawumia, who a former Deputy Governor of the Bank of Ghana, said since the GIIF is not yet operational, government transferred this amount into a private bank and bizarrely borrowed the money through treasury bills.
This, he believes amounts to causing financial loss to the state because the government has borrowed its own money and is paying an interest on same.
But Mr Terkper argues the former deputy Governor of the Bank of Ghana's claim is not only “factually wrong” but also is “technically deficient.”
In a statement issued in Accra, the Finance Minister argued the transfer of the money to a private bank by the government breached no law.
The statement explained “A key strategy of GIIF is to use its resources to leverage investor funds for accelerated infrastructure development”, adding the government’s allocation of the $250 million seed fund for the GIIF in 2014 was to achieve this end.
It, however, warned such "misinformation of Ghanaians and the international community in this manner" may end up creating uncertainty in the minds of investors about the country's economy.
It could also "damage the appetite for Ghana bonds", it added.
Read full Statement below:
PRESS RELEASE – REBUTTAL TO DR. BAWUMIA’S STATEMENT ON THE EUROBOND AND THE GHANA INFRASTRUCTURE INVESTMENT FUND INTRODUCTION
1. Government’s attention has been drawn to a statement by Dr. Mahamudu Bawumia, the running mate to the Flagbearer of the New Patriotic Party, that Government is diverting US$250 million of the US$1.0 billion Eurobond issued last year to the Ghana Infrastructure Investment Fund (GIIF), which he claims not in operation, to a private account in a private bank, for election campaigns ahead of the November polls.
2. The Government wishes to state unequivocally that, the statement is factually wrong, technically deficient and gives a wrong impression to both Ghanaian and international investors and development partners.
THE GIIF ESTABLISHMENT
3. We note that the passage of the Ghana Infrastructure Investment Fund Act, 2014 (Act 877) established a Fund which is owned by the Republic of Ghana to mobilise, manage, coordinate and provide financial resources for investment in a diversified portfolio of infrastructure projects in Ghana for national development.
4. Section 5 of the Act provides for the sources of money for the Fund, which includes a portion of the Annual Budget Funding Amount (ABFA) from of the oil revenue; and moneys borrowed and raised from local and international capital market or from its affiliates. Further, as noted, a portion of the Bond proceeds was given as seed money to GIIF.
5. Furthermore, the Fund is mandated by Section 3 of the law to invest in, purchase, maintain and realize any investment of any kind.
6. Consequently, GIIF is set up as Sovereign Wealth Fund and it’s a Statutory Fund just like the District Assemblies Common Fund (DACF), Ghana Education Trust Fund (GETFund) and the National Health Insurance Fund (NHIF) and is by law operationally independent.
7. The Funds of GIIF are, therefore, not to be comingled with central government funds.
8. The Board of the GIIF has been inaugurated with the Ag. CEO in place the Fund is in operation. The administrative processes for its full operation has begun and an Ag. CEO has been appointed.
9. Following from the above facts, a key strategy of GIIF is to use its resources to leverage investor funds for accelerated infrastructure development. It is in line with this that the Government allocated an amount of US$ 250.0 million as a seed fund for the GIIF in 2014 and not in 2015 as stated by Dr. Bawumia.
10. Accordingly, the Board which has the powers under Section 3 of the Act to manage and invest contributions made to the fund and to reinvest into the fund to generate returns could put its resources in a commercial bank for the sole purpose of investment.
11. Section 3 of the Act also confirms the provision in Section 21(2) of the Financial Administration Act that makes provision for the investment of public money in securities.
12. Consequently, the funds which goes into GIIFs Account in any Commercial Bank, cannot be misapplied for election purposes. Rather, any idle fund will earn interest to support infrastructure development of the country.
13. It must be noted that Public Funds do not only reside in the Bank of Ghana. There are public funds in Commercial Banks and International Financial Institutions where necessary, acting as agents for the Bank of Ghana. This is all accounted for as part of Public Funds.
USE OF EUROBOND PROCEEDS
14. In a related development, Dr. Mahamudu Bawumia is mixing operations of the Eurobond funding in both 2014 and 2015.
15. It may be recalled that in 2014, Parliament gave approval for Government to source for a Eurobond to finance infrastructure budget of Government in 2014. Considering that the GIIF is now a special vehicle for the purpose of developing infrastructure budget of Government, the Eurobond financing of the 2014 infrastructure budget was the most appropriate thing to do.
16. The 2015 Eurobond of US$1,000.0 million is for refinancing of domestic debt purposes only. This amount was on the back of a World Bank guarantee (US$400 million).
The guarantee and the amount was solely for refinancing of domestic debt. Nowhere in the prospectus or the policy statements of Government has the issue of budget financing been linked to it. 17. We may recall that as part of the IMF Extended Credit Facility Programme, The Bank of Ghana would no more finance Government budget deficit. This is what we call the zero financing of the budget by the Central Bank.
Consequently, Government’s strategy to manage the financing of the budget is to explore alternative financing instruments. One of the strategies is the earning of interests on Government’s own idle funds in the Banks. Following from this, a number of Request for Proposals (RFPs) and stakeholder engagements have been held to implement this strategy.
CONCLUSION
18. In conclusion, we wish to assure all Ghanaians that the US$250 million seed money to GIIF lodged by the Board with a Commercial Bank is safe and has already started bearing interest to the idle Fund.
19. It must be noted that Ghana now sources for some of its financing from the international capital market. The market has stringent rules and international law backing these transactions.
20. It should be note that misinformation of Ghanaians and the international community in this manner, creates uncertainty in the minds of investors and could damage the appetite for Ghana bonds and such misinformation should cease.
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