The Institute of Fiscal Studies (IFS), an economic policy think-tank, has backed Dr. Mahamudu Bawumia and the NPP Minority in parliament on their claim late last year that the 1billion dollar Eurobond proceeds had been diverted into settling the Government's debt at the Bank of Ghana.

An analysis of the Ministry of Finance's own Fiscal Accounts by the Institute showed that the Government retired part of its indebtedness to the Bank of Ghana in September 2014, using the proceeds from the Eurobonds.

The latest revelation, which vindicate the NPP Vice-Presidential candidate, who first claimed the Eurobonds had been diverted to settle debts owed by government is contained in a 41-paged paper prepared by the institute, titled "Ghana: A Review of the 2015 Budget"

In section 4.11 which deals with the utilization of the Eurobonds, the Institute states, "Quite clearly, the proceeds of the bond are to be used to invest in government projects and to partly retire outstanding short-term domestic debt. While the Ministry of Finance issued a press statement explaining that the government was using the US$1.0 billion Eurobond money judiciously, there is an allegation that the money has been used to pay debts owed to the Central Bank, and this allegation appears to be true judging from the manner in which the Bank of Ghana financed the budget deficits during the third quarter of 2014."

The institute further stated "The Bank provided deficit financing of Ghc2,721.4 million in quarter one (Q1), Ghc629, 6 million in Q2, and Ghc1,998.1 million in July and August, bringing the total of the Bank's financing of the deficit between January and August 2014 to Ghc5,349.1 million. In September, the Bank of Ghana received payment amounting to Ghc2,998.6 million out of the total of Ghc3,289 million the government borrowed from abroad to partly pay the debt owed to it. Of the total Ghc3,289 million borrowed from abroad, Ghc3,161.9, reflecting over 83 percent, was the Eurobond proceeds. Clearly, the Ghc2,998.6 million paid to the Bank was most likely the Eurobond proceeds less the transaction costs."

Dr. Mahamudu Bawumia, Vice-Presidential candidate of the NPP was first to raise issues with the use of the Eurobond proceeds. While commenting on the 2015 Budget on November 22nd in London, Dr. Bawumia stated, "In the prospectus that sought to convince investors, 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? The Minister should list and provide a detailed plan of what projects he has in mind. We are reliably informed that the amount raised 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. This is sad and raises a whole lot of credibility issues."

Dr. Bawumia further challenged the government and Bank of Ghana to speak on the matter and clear the issue.

He explained that under the Bank of Ghana Act, the bank could not extend credit to government in excess of 10% of government revenue in the year. "The sovereign bond has been used to bring government within this limit. It is therefore not available for capital expenditure unless the law is violated".

These statements of Dr. Bawumia were as usual met with a ton of responses from various Government spokespersons and Ministers at the Finance Ministry who claimed the former Deputy Governor of the Bank of Ghana did not know what he was talking about while providing conflicting answers to the core issue of where the money was.

First, the Government explained that: "The proceeds from the Eurobond issue are being used for the intended purpose as listed in the prospectus, and that was: (1) To fund the investment infrastructure fund, and (2) To pay for infrastructure development that the government has prioritised. And that is what is going to happen...some of them have begun, The Kasoa bypass is one: that is about 37 percent complete now. The Kwame Nkrumah Interchange... that is about 62 percent complete. The polo grounds bypass, about 92 percent; Ayamfuri... road, 36 percent of that has already been done"

The Minister of Finance further muddied the waters by stating that some $800 million of the funds were sitting intact in a Bank Account in New York. Furthermore, some in Government claimed that the Eurobond proceeds arrived too late to be accounted for in the 2015 budget and that it would be accounted for only when the proceeds had been fully used.

The latest revelation by the IFS seems to have put to sleep the doubts about what really the Eurobond was used for and brings into focus the new dimension of what would be left of government's credibility, especially on the international market, after it had listed various projects in the prospectus used to raise the Eurobonds, as projects on which the Eurobond proceeds would be used.