$250m Eurobond proceeds not diverted into private bank - Terkper
The Minister of Finance, Mr Seth Terkper, says accusations by the 2016 running mate of the New Patriotic Party (NPP), Dr Mahamudu Bawumia, that the government has diverted US$250 million of the Eurobond proceeds into a private bank are false and should, therefore, be ignored.
Advertisement
“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 minister said.
Mr Terkper explained in Accra that the money, which was disbursed to the Ghana Infrastructure Investment Fund (GIIF) last year, had rather been invested with selected commercial banks in the country, pending the full take-off of the fund later this year.
So far, the invested funds had yielded some GH¢23 million in interest within the period that they were invested in treasury bills and other government securities, the minister said at a press briefing yesterday.
“Once the setting up of the GIIF, which is meant to mobilise capital for strategic infrastructural projects, is complete, the principal and the interest earned will be made available to the fund for onward investment in selected capital projects,” he said.
The US$250 million was disbursed from US$1 billion Eurobond obtained in 2014 to the GIIF as one of the sources of seed capital for the fund.
GIIF in transition period
Mr Terkper’s comments on the matter followed concerns by Dr Bawumia that the government had misapplied allocations to the GIIF for the sake of political expediency.
That, he said, exemplified government’s recklessness in public financial management.
Other Trending Stories
“Notwithstanding the fact that the GIIF is not operational and there are no projects for the GIIF to implement now, the government, unbelievably, transferred the US$250 million from the Bank of Ghana to GIIF’s account at a private bank.
“With no project to execute, these funds have now been lent to government through the purchase of treasury bills! This is unbelievable,” Dr Bawumia had said in Accra.
However, while dismissing Dr Bawumia’s comments as ill-informed and diversionary, the Finance Minister said the decision to invest the funds was in line with the GIIF Act which established the fund two years ago.
“Section 3 of the act (GIIF Act, 2014 (Act 877) also confirms the provision in Section 21(2) of the Financial Administration Act that makes provision for the investment of public money in securities.
“Consequently, the funds which go into the GIIF’s account in any commercial bank cannot be misapplied for election purposes. Rather, any idle fund will earn interest to support infrastructure development in the country,” Mr Terkper said.
He also countered claims by Dr Bawumia that the GIIF was not in operation, explaining that it was currently in transition pending the completion of the administrative processes needed to establish it.
New thinking in government
He explained that the decision to invest the funds pending the full take-off of the GIIF was part of “a new thinking” within government that idle funds must deliver value to the state.
Unlike before, he said, the ministry was now working at getting optimal returns on all government funds as part of efforts aimed at increasing revenue mobilisation in response to rising public expenditure and key changes in the public finance management system.
“As a government finance officer, if I may put it that way, I want optimal returns on all government funds and that is why I find it prudent to invest those funds, instead of allowing them to remain idle.
“As part of the rethink, a change in policy and the need to do things differently, the decision is that idle funds should be invested to earn interest for the taxpayer,” he said.
Mixing issues
The Finance Minister said Dr Bawumia was mixing the operations of the Eurobond funding in 2014 with those of 2015.
Unlike the 2015 Eurobond which was approved for infrastructural financing, he said, the 2014 bond was meant solely for the refinancing of domestic debt purposes.
Advertisement
“This amount was on the back of a World Bank guarantee (US$400 million). The guarantee and the amount were 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,” he added.
Following the coming into effect of the zero financing of the budget by the central bank, the minister said, the government’s aim was to explore alternative financing instruments that would help plug the financing loophole created by the new measure.
“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 (RSVP) and stakeholder engagements have been held to implement this strategy,” he said.