|
Press Release
NPP
November 24, 2014
“WHERE’S
THE $1BN SOVEREIGN BOND?” BAWUMIA ASKS GOVT
Last September, Ghana sold a US$1 billion Eurobond, five
days before talks began with the International Monetary Fund
for a possible financial bailout. The Finance Minister said
at the time that a bigger chunk of the cash raised was to
develop the country’s infrastructure.
But, Mahamudu Bawumia, the 2016 Vice Presidential Candidate
of the New Patriotic Party, is asking Government to list the
projects for all to see, since they appeared missing in the
2015 Budget, read last week.
Dr Bawumia believes the $1 billion raised on the money
market has been used to do nothing more than to artificially
shore up the cedi from depreciating against major
currencies.
He further disclosed how the government of the National
Democratic Congress has used Ghana’s limited foreign
exchange not to invest in productive projects but to merely
stop the local currency from sliding.
According to the respected economist and running mate to
Nana Akufo-Addo, the NDC has spent over $5 billion more in
six years to sustain the cedi than the NPP did in eight
years and yet the NPP did a far better job than the current
government to stabilize the cedi.
Addressing a group of UK-based Ghanaian professionals at a
breakfast meeting in London Saturday, the former Deputy
Governor of the Bank of Ghana disclosed, “We are reliably
informed that the $1 billion raised from the sovereign bond
has been used to reduce government’s indebtedness at the
Central Bank and that the funds are not available anymore
for the purpose for which it was raised.”
Dr Bawumia stressed, “This is sad and raises a whole lot of
credibility issues. How can we borrow such a huge amount to
fill a gap at the Bank of Ghana, the central bank? Is this
the use to which non-concessional borrowing should be put?
This is a very serious development and the Government and
Bank of Ghana should urgently comment on this.”
Nana Akufo-Addo’s running mate recalled how “The Government
announced to the world that it was seeking the support of an
IMF supported program to help address the current imbalances
in the economy. On the basis of this, it was able to calm
the nerves of investors and issue a $1 billion sovereign
bond.”
He challenged the Finance Minister, Seth Terpker, to show to
Ghanaians that he has used the $1 billion for the purpose
the bond was issued.
“In the prospectus that sought to convince investors,” he
explained, “the Minister of Finance indicated that a
substantial portion of the amount borrowed would be used for
infrastructure development and critical projects. What
projects did the Minister of Finance have in mind?”
Calling for details, Dr Bawumia added, “The Minister should
list and provide a detailed plan of what projects he has in
mind.”
He further disclosed that “In the last six years the Bank of
Ghana has spent in the range of $6.5 billion to sustain the
cedi. In the eight years that we, the NPP, were in office,
we spent only $1.2 billion to maintain the value of the cedi
and we did relatively well to keep the cedi stable.”
Before the September bond issue, the local currency, the
cedi, fell around 40 percent against the dollar between
January and August, gaining ground in part because of the
IMF bail out announcement and also the Eurobond.
But, as hinted by some traders before the sovereign bond
issue, it appears the Ghana Government was not exactly
committed to an IMF programme and the announcement was made
to hoodwink investors and shore up the then under pressure
cedi.
Dr Bawumia said at the Young Executive Forum-sponsored
Breakfast at the Pestana Chelsea Bridge Hotel that there was
no guarantee that Government could secure an IMF agreement
in 2015 and the implications could be dire, including donors
withholding grants for budgetary support.
He said, “Turning to Government’s budget statement, we see
no elements of an underlying agreement on an IMF supported
framework. Are we likely to see a revised budget statement
if a final deal is concluded in 2015?”
He posed a few pertinent questions, “Where is the financing
coming from to fill the budget gap? Are Donors likely to
disburse without an IMF agreement and in the midst of
corruption especially in payroll administration?
“Is the government planning on using parastatals like GNPC
(which has recently entered into an agreement to borrow $700
million without parliamentary approval, in violation of the
Constitution and the Petroleum Revenue Management Act) to
fill the gap?
“What will the government do if there is no IMF agreement?
The questions are tall and this budget is therefore clouded
with so much uncertainty going forward.”
The renowned economist further disclosed, “In the last six
years the Bank of Ghana has spent in the range of $6.5
billion to sustain the cedi. In the eight years that we, the
NPP, were in office, we spent only $1.2 billion to maintain
the value of the cedi and we did relatively well to keep the
cedi stable.”
Ghana sold Eurobonds in 2007 and in 2013, when the yield was
8 percent, but analysts expected a higher rate this time.
The rate reflected the appetite for relatively risky
sovereigns given lower yields in developed markets, they
said.
The September sovereign bond was at a coupon rate of 8.125
percent, lower than analysts had expected given the fiscal
difficulties faced by Ghana as it wrestled with escalating
inflation, a falling currency and a stubbornly high budget
deficit.
The bond was, however, oversubscribed with orders of up to
$3 billion.
"Investors saw fundamental long-term value in the Ghanaian
economy. We have always emphasized that the mid-term
prospects for Ghana were bright and with the coming on board
of the IMF, we hope to come out of our short-term challenges
pretty soon," Terkper said in a statement last September.
New Patriotic Party
Headquarters, Private Mail
Bag, Accra-North, Ghana
Tel: +233 0302 264329/ 264288 Fax: +233 0302 229 048
Email: nppdcom@gmail.com Website: www.newpatrioticparty.org
|
