The Government has completed the payment of all legacy debts owed the Bulk Oil Distribution Companies (BDCs) and Banks towards reducing the Non-Performing Loans (NPLs) in the banking sector and strengthening the operations of the BDCs.

It comprises a total of GHC515,407,047 for Real Value Factor (RVF) and $99,667,917 for Forex Loss Under-Recovery Interest (FLURI).

A statement issued by the Public Relations Unit of the Ministry of Finance and copied to the Ghana News agency, on Wednesday, said following an Ernst& Young validation of the claims based on the agreed terms reached by the Ministry of Finance, Central Bank and the BDCs, it saved the nation GHC324,571,093 (39%) on the RVF and $33,682,708 (25%) on the FLURI respectively.

The debts were settled in full with proceeds from Energy Sector Levy Act bonds, under Energy Sector Levy PLC, issued in June 2019 and in January 2020, it explained.

These were not Central Government debts due the BDCs it inherited through ESLA PLC.

Giving the background to the debt, the statement said in early February 2017, the Ministry received a letter from the Chamber of Bulk Oil Distributors (CBOD) demanding for the payment of outstanding claims.

These included $140,609,313 of Forex Loss Under-Recovery (FLUR) for the period 2011 - 2015 due which had been validated by Ernst & Young (EY) and was agreed and signed off by the previous Government.

Others were an additional Forex Loss Under-Recovery (FLUR) amount of $44,847,784 due for the period 2011 - 2013, which was not yet validated, a Real Value Factor (RVF) amount of GH¢541,058,361 and a Forex Loss Under-Recovery Interest (FLURI) amount of $108,563,490, which were yet to be validated.

“Forex Loss Under-Recovery (FLUR) is the loss incurred by the BDCs as a result of the differentials between the GHC/USD$ foreign exchange rates determined by the National Petroleum Authority (NPA) for the pump prices and the rates at which the forex rates were supplied by the Bank of Ghana on behalf of the Government of Ghana (GoG), it explained”.

“Forex Loss Under-Recovery Interest (FLURI) on the other hand, is the interest accrued on the delayed payments of forex loss under-recoveries, while Real Value Factor (RVF) is the interest accrued on the delayed payments of price under-recoveries”.

The statement said, the Government since 2017, had taken a number of steps to evaluate, validate and settle the total amount due the BDCs and Banks.

“The steps included settling the agreed and signed off validated but still outstanding forex loss under-recovery amount of $140 million through the ESLA Bond Issuance on November 9, 2017 and appointment of EY to validate the unvalidated additional forex loss claim of $44.83 million.

“The validation exercise resulted in a reduction of $19.15 million for the amount claimed, (representing 43 per cent savings) from $44.83 million to $25.68 million”.

The statement said to determine if the claims for RVF and FLURI were worth considering or should be disregarded, the Ministry commissioned a five-member committee with industrial and practical experience within the petroleum downstream sector to review and advise the Ministry on the validity of the RVF and FLURI claims.

The committee concluded in their report that, given the nature of the downstream business operations and its associated risks as well as Government’s policy on fuel subsidy at the time, the grounds for claims for RVF and FLURI were genuine and thus advised the Government to validate the amounts and settle it.

The Economic Management Team (EMT), subsequently, directed the Ministry and the Central Bank to invite the BDCs to a discussion with respect to the RVF and FLURI amounts and to review the process used and interest rates applied to come up with the settlement amounts.

“Based on the discussion and the terms agreed among, the MoF, BoG, BDCs, and EY were requested to validate the amounts claimed for RVF and FLURI, using 31st March 2018 as the cut-off date for the validation.

The claims as of that date per the BDCs, stood at GH¢839,978,140 and $133,350,625 for RVF and FLURI respectively.

The EY validation based on the agreed terms resulted in an amount of GH¢515,407,047 and $99,667,917 for RVF and FLURI respectively, as against GH¢839,978,140 and $133,350,625 that had been initially claimed translating into a saving of GH¢324,571,093 (39%) and $33,682,708 (25%) respectively.