[ 2016-05-10 ]

Bawumia claims $250m transferred wrongly from BoG; but gov't responds
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.

Source - Myjoyonline.com

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