.......... as IMF confirms existence of borrowing cap

The Minority Leader in Parliament, Osei Kyei-Mensa-Bonsu, has described as unfortunate the impression created by President JEA Mills that he is not in charge of the country and not up to date with issues of national importance when President Mills stated he was not aware of a borrowing cap agreed to by the IMF and Ghana.

“This is important information the President must know about,” Osei Kyei Mensa-Bonsu said.

President Mills President Mills, in an interaction with a section of the media upon arriving from the UN General Assembly, raised doubts about the claims by the Minority that the government had breached an agreement with the IMF on borrowing, saying he is unaware of any agreement with the IMF that restricts Ghana on the amount of loans it can access in a year.

"I am surprised that people are putting a spin on this. They [IMF & World Bank] are very supportive. They know we need the assistance for infrastructure development. I haven’t spoken to the Minister of Finance, who would be the best person to sign such an agreement, I really don’t know their (Minority) source, so I cannot firm, or even deny….if there was any such development, it would have been brought to my knowledge,” President Mills said

However, a “Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding” dated May 12, 2011 and signed between the International Monetary Fund and theRepublic of Ghana has exposed President Mills’ lack of knowledge of what his government agrees to with donor agencies and countries.

Page 17, Section D of the document, titled “Public Debt Management” expressly states that “In 2011, commercial borrowing will not exceed $800 million.”

It continues: “GNPC envisages a commercial borrowing need of $300 million, in large part to cover its share of investments in the oil and gas sectors. Outside the oil and gas sectors, the government plans to limit new commercial borrowing to $500 million.”

After this agreement was signed and conditionalities agreed to by the Minister of Finance, Kwabena Dufuor, and governor of the Bank of Ghana, Kwesi Amissah-Arthur in May 2011, Ghana then went to the Chinese to sign up for the $3 billion commercial loan facility in August the same year, knowing fully well they could not borrow above $800 million in 2011.

This will not be the first time the Mills administration has aptly demonstrated its incompetence and the wanton breach of the laws either of this country or agreements it has entered into with donors.

In signing up for the $3 billion Master Facility Agreement with the China Development Bank Corporation, the Ministry of Finance, on behalf of the Republic of Ghana, stated emphatically in the agreement document that “No World Bank or IMF approval was needed”

Section 16.13, page 38 of the Master Facility Agreement states: “The Execution and delivery by the Borrower [Ghana] of Finance Documents and the performance of its obligations under the Finance Documents do not require any approval of the World Bank and/or the International Monetary Fund; and are not in breach of any agreement entered into between the Republic of Ghana and the World Bank and/or the International Monetary Fund.”

The September 9, 2011 edition of the New Statesman, in a publication under the banner headline “IMF VETOES $3BN LOAN” reported that the IMF had told the China Development Bank Corporation and the Ministry of Finance that the $3 billion loan agreement infringed on the conditionalities stated in the MoU of May 12, 2011.

As such new borrowing limits for the 2012 would have to be negotiated with the IMF. Simply put, the $3 billion for 2011 is a no go.

A serious breach of Petroleum Revenue Appropriation Law by President Mills’ government, in their decision to contract the $3 billion loan, has also been raised with the Executive Director of the Danquah Institute, Gabby Asare Otchere-Darko, describing the MFA as an illegality.

The Minority has confirmed this assertion by stating that government is violating Section 18(7) of the Petroleum Revenue Appropriation Law which says that future oil resources cannot be collateralized for a period exceeding 10 years.

The first tranche of the MFA which amounts to $1.5 billion has a repayment period of 15 years, with our oil proceeds being used to settle this debt, in clear violation of Section 18 (7) of the law.

Another example of the NDC’s incompetence was demonstrated in the STX housing deal brokered by the Vice President, John Mahama.

The Vice President had gone to South Korea and signed an MoU with the Koreans stating that Ghana’s oil would be used as collateral for the now defunct STX housing Project.

At the same time, however, the Petroleum Revenue Management Bill which was being debated on the floor of parliament expressly stated that Ghana’s oil should not serve as collateral for any loan a government would contract.

It wasn’t until later during the debate in parliament that the clause allowing the use of Ghana’s oil as collateral was approved, for not more than 10 years, however.

In a related development, a member of the communications team of the New Patriotic Party, Samuel Abu Jinapor, has implored the NDC to give ear to the numerous concerns raised by the NPP and civil society concerning the accessing of the $3billion Chinese loan.

"I believe it is about time that government took a break and reflected on the concerns being raised by the NPP...Government should patiently listen when civil society groups or the NPP raise concern about some of the decisions they intend taking...recent happenings and the failures of the NDC government to fulfil its promises have proven that concerns raised by the NPP are legitimate,” he said.