The Government of Ghana in attempt to respond to a call to support local banks after refusing to do so finally set up a special purpose vehicle called GAT to invest in selected local banks with two important criteria- solvent and well managed.

Meaning the entire management of these banks meet the corporate governance requirements of the Bank of Ghana (BoG) and are liquid.

This effort which target capitalization of the local banks to be concluded in March 2019 is an extension of the deadline for the affected banks.

The earlier announcement about the formation of GAT indicated that GAT will borrow from private pension funds and the amount raised will be invested in the local banks.

The arrangement raised questions from labor unions and other stakeholders awaiting answers. The decision of the government to raise the Ghc2billion now from the international market with roadshow scheduled for 18th February, 2019 as reported by Bloomberg amounts to failure to raise the funds from private pension funds in Ghana and the signal will be captured by international investors in the coupon arrangement.

It also signals additional political risk for the GAT bond, the creation of which faces some legal interpretation as some believe the government own GAT 100% and can only do so by Parliamentary approval.

It is also clear that per section 9(d) of ACT 930 it is prohibited to use borrowed funds to capitalize a bank in Ghana.

Investors will like to know the balance sheet of these banks and other sensitive information to make sound investment decisions.

The question is since GAT has not yet invested in these banks who will deliver such documents to the international lenders and in what capacity?

Since the GAT arrangement means a 3month extension of deadline, what happens if the post Valentine day GAT bond is undersubscribed? Will there be another extension of time?

If extension of time is now allowed and borrowing to capitalize is now allowed then, it should have been most appropriate to extend the time for these banks till the end of the second quarter of 2019 and allow them to raise their own bonds to capitalize without the temptation of takeover of these local banks through the GAT.

The fundamental questions and consequences about the GAT will live with us irrespective of whether pension funds are borrowed or international bonds are issued.

The government is supposed to explain why the failure to raise the funds from private pension funds in Ghana especially when this bond is to be issued with the backing of the sovereign guarantee of the Republic. Lack of disclosures signals more risk.