The Minority in Parliament is accusing government of not disclosing to the House, its failure to pay workers’ contributions amounting to 914 million cedis in December 2014.

According to the NPP MPs, government should have informed Parliament about the matter, but it did not. The Minority said they only got to know about it through the IMF criteria performance on Ghana’s extended credit agreement.

The Minority insisted at a press conference in Accra Wednesday that the decision by government to securitize it arrears to SSNIT should have been brought to Parliament for it to be discussed.

Government at the end of 2014 was supposed to pay 914 million cedis to the Social Security and National Insurance Trust as workers contribution. Government however asked SSNIT to pay the 914 million cedis on its behalf to be repaid later.

Joy News Elton John Brobbey who covered the press conference said the MPs accused government of holding back the money it ought to have paid SSNIT only to sell it out as bonds.

“As a result of the behind the curtain securitization of the arrears, the fiscal deficit of 2014 has been revised upward from 9.4 to 10.3 percent of GFDP,” Deputy ranking member on the Parliamentary Committee on Finance, Dr Mark Assibey Yeboah told the media.

He explained, “This then means there have been double digit fiscal deficit for three back to back years, which has never before been seen in this country.”

The Minority also stated that IMF review also indicated that “the Bank of Ghana had paid dividend to government amounting to 0.4 percent of GDP. Since this transfer was unanticipated, it has led to a larger than programmed total revenue for 2015. The spending of this unanticipated inflow has not been approved by Parliament. Meantime, the government plans to use up to half of the BoG dividend to cover the damage of the June 2015 flood disaster. Again! It also plans to use the remainder to clear part of newly identified arrears with the Bulk Oil Importers [BDCs]. Who authorized these spending? Which Parliament?”

 

Below is the full statement

OUR SINKING ECONOMY MUST BE SALVAGED

We have invited you today to highlight a few happenings in our checkered economy. Our presentation would focus on Ghana’s 3-year program with the IMF and the Eurobond issue that was concluded last week.

ON THE IMF PROGRAM

You would recall that the minority in Parliament in early September raised the issue of Government’s violation of Article 181 of Ghana’s Constitution. The violation stems from the fact that the Extended Credit Facility [ECF] being contracted by government from the Fund is a loan which requires parliamentary approval. Government, as usual, has responded that they do not require parliamentary approval, in the process exposing the ignorance of the Deputy Minister of Finance. We wish to reiterate the point that the government is in violation of the constitution, and that we would not put the matter to rest until the right thing is done. We intend to use all parliamentary and legal options available to us in the coming weeks to ensure that the laws of the land are respected.

As if by coincidence, around the same period of our press engagements, the IMF issued its country report that reviewed the ECF arrangement. From the review, it must be underscored that the performance criterion on the ceiling of gross credit to government by the Bank of Ghana was missed. Furthermore, indicative targets on inflation and social spending were also missed. Most importantly, three key issues emerged from the IMF review, which were not previously known. These are as follows: 

1. The review indicated that the Bank of Ghana had paid dividend to government amounting to 0.4 percent of GDP. Since this transfer was unanticipated, it has led to a larger than programmed total revenue for 2015. The spending of this unanticipated inflow has not been approved by Parliament. Meantime, the government plans to use up to half of the BoG dividend to cover the damage of the June 2015 flood disaster. Again! It also plans to use the remainder to clear part of newly identified arrears with the Bulk Oil Importers [BDCs]. Who authorized these spending? Which Parliament?

2. It also emerged from the review that the government at the end of December 2014 securitized its arrears to SSNIT in the tune of GH¢914 million or 0.9 percent of GDP. Parliament was not informed and has not been updated. As a result of the behind-the-curtain securitization of the arrears, the fiscal deficit of 2014 has been revised upward from 9.4 to 10.3 percent of GDP. This means that there have been double digit fiscal deficit for three back-to-back years, which has never before been seen in this country.

3. The Fund agreed to raise the debt limit on non-concessional loans for the rest of 2015 from $1 billion to $2.5 billion, ostensibly to allow government the space to issue a larger Eurobond and also to borrow more externally. Of course, we know what happened with the Eurobond disaster, which we will touch on again shortly. So the government is comfortable applying to the Fund for our borrowing ceiling to be raised but is unprepared to submit its dealings to the Parliament of Ghana.

These three afore-mentioned issues are sufficient reasons why government has to present the whole ECF program with the Fund to Parliament for scrutiny and approval. To reiterate, government needs Parliamentary approval to spend the BoG dividend. For the avoidance of doubt, the non-recourse to Parliament in securitizing its debt to SSNIT is unacceptable. Parliament must probe into the securitization of government's debt to SSNIT.

ON THE EUROBOND ISSUE

As regards our fourth foray into the International Capital Market, the least said about it the better. We  recall that before Parliament rose in July, government sought and got approval to raise $1.5 billion in our Eurobond issue. Parliament was duly informed that the money would be put to these uses:

· Refinancing of Ghana 2017 bond  $530 million

· Capital Expenditure    $470 million

· Liability Management [Domestic]  $500 million

The government informed Parliament that their indicative yield was in the range of 8.50% to 9%. But because the major credit rating agencies had downgraded Ghana to B1 or B-, six levels below investment grade, the government could not venture into the market with our time-tested Sovereign Guarantee. Government had to secure a $400 million World Bank Policy Based Guarantee [PBG] to offer security to investors.

To put matters in proper perspective, our first Eurobond issue with a ‘naked’ Sovereign Guarantee attracted a yield of 8.50%. At the time, our credit rating under President Kufuor was B3 or B+. We went to the market then without a World Bank Insurance cover because our macroeconomic fundamentals were strong, our rating was very good and our debt was sustainable. Even though the global credit crunch was rife in 2007 and average LIBOR was 5.251%, we only paid a little premium.

Fast forward to 2015, Ghana's Sovereign Guarantee is of no value, our rating has deteriorated to junk status, our debt is unsustainable, LIBOR is 0.5266%, and yet in the face of a PBG, we had to pay a premium so high that the yield on the issue was 10.75%. This is the highest yield on an Eurobond issue ever paid by an African country. It is embarrassing, to say the least. How can a developing country like Poland get a yield of 0.94% on the same day that Ghana issued? Angola, last week postponed plans for a $1.5 billion bond to await better market conditions. Even Zambia with all of its problems got a yield of 9.37%.

Ghana was desperate. We so much needed the money that we were prepared to pay any yield to sell the bond. Why did we reduce the size of the offering by $500 million? It is because of our worsening credit fundamentals. At this rate, we have to cough up $107.5 million a year for the next 15 years in interest payments on this bond alone. That means that over the next 15 years, interest payments on this bond alone could have provided the country with ten [10] N1 highways with all the needed flyovers.

That said, we do not want government to misspend this money the way they did with last year’s issue when they could not account for the $1 billion sourced. We want government to tell the Ghanaian people what actual use they will put the money to. The sad but plain truth is that the managers of the country have been manifestly careless in going to the bond market at this material time. Notwithstanding, government must not be callous in spending the money for after all it is the overburdened citizens of this country who will have to pay back the careless borrowing of government when the time is due.