Use of $1 billion Eurobond:Tell us the truth — NPP
The New Patriotic Party (NPP) Members of Parliament (MPs) have challenged the government to give account of how it has used the $1 billion Eurobond it secured from the international capital market to finance capital projects.
It also called on Parliament to institute an inquiry into how the government used proceeds of the $1 billion Eurobond secured in September this year.
At a press conference in Accra yesterday, the Ranking Member of the Committee on Finance, Dr Anthony Akoto Osei, described the explanation by the government concerning the use of proceeds from the Eurobond as contradictory and an attempt to throw dust in the eyes of the public.
He said the government borrowed some $1 billion on the international capital market in 2013 and another $1 billion in September 2014.
He said the government indicated in the prospectus for the issue of the bond that the proceeds would be primarily used to finance capital projects.
Tell us the truth
‘’We have asked that in the interest of probity, transparency and accountability, the Bank of Ghana (BoG) should publish details of payments and transfers out of the September 2014 sovereign bond account and the balance on the account for all Ghanaians to see,’’ he said.
He said in response to what he described as a simple question, the government had provided contradictory and “ultimately untrue explanations”.
According to Dr Osei, the first explanation by the Deputy Minister of Finance indicated that proceeds from the Eurobond were being used for the intended purpose, as listed in the prospectus.
Contradiction
He said the Minister of Finance further muddied the waters when he stated that some $800 million of the fund was sitting intact in a bank account in New York while, in another breath, the minister indicated that the Eurobond proceeds arrived too late to be accounted for in the 2015 budget.
“Unfortunately, the evidence available shows quite clearly that the explanations offered by the government so far do not represent the truth,’’ he said.
He said the BoG’s monetary accounts for 2014 revealed the true picture that the sovereign bond had rather been used to reduce government indebtedness to the Central Bank and not applied for the purpose for which the money was borrowed.
Dr Osei said data from the BoG showed that the bank’s net credit to the government had increased from some GH¢5.3 billion at the end of December 2013 to GH¢10.6 billion by August 2014, representing an increase of 100 per cent.
He said the massive extension of credit to the government by the BoG represented a breach of the BoG Act 2002 (S.30 (2)) and the criterion established by the six countries in the West African Monetary Zone, both of which stipulated that the BoG could not extend credit to the government in excess of 10 per cent of government’s tax revenue for the year.
According to him, the cedi counterpart of the Eurobond inflow of $1 billion (some GH¢3 billion) into government account at the BoG could be seen in the net credit to the government, in line with the monetary account which indicated that outstanding BoG credit to the government was simultaneously reduced from GH¢10.6 billion in August 2014 to GH¢7.3 billion in September 2014.
Proceeds
Dr Osei said the sovereign bond proceeds had, therefore, been fully reflected in government’s position at the BoG and used to reduce government’s indebtedness to the BoG, such that the bank could comply with Section 30 of the BoG Act.
He said once the Eurobond proceeds had been used to repay the government’s indebtedness at the BoG, they could no longer be available for the capital expenditure for which the funds were secured.
“This is why the government does not seem to be able to answer the simple question as to what the funds have been spent on. Answering that question truthfully, as captured in the BoG’s monetary account, would indicate that the government has misapplied the Eurobond proceeds in a manner inconsistent with the prospectus underpinning the bond issue and has, therefore, misled the international investors,’’ he added.
Dr Osei said in the prospectus for the bond issue that was recently distributed to Parliament, the government told investors that the Republic expected the net proceeds from the issue of the notes to amount to approximately $988,710,000 which would be utilised to fund budgeted capital investments in government projects.
He stated further that the Republic expected to allocate most of the net proceeds primarily towards the government’s investment projects funded through the Ministry of Energy, the Ministry of Local Government and Rural Development, the Ministry of Water Resources, Works and Housing, as well as the Ministry of Transport.
He said the government had expected that projects in which the Republic was investing, together with its development partners, would take priority in the allocation of the proceeds.
Dr Osei said by that action, Ghanaians would be deprived of the benefit of the much needed development from the investment of the sovereign bond proceeds in capital projects, while facing the additional burden of repaying the debt.
He, therefore, called on the President, the Minister of Finance and the Governor of the BoG to save Ghanaians from embarrassment from foreign investors and use the proceeds for the intended purpose for the taxpayer who would eventually pay for the bond to derive the benefits.
