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Former Finance Minister Seth Terkper has rejected claims that the National Democratic Congress (NDC) government took a loan from the Bank of Ghana to finance the 2016 budget.
Seth Terkper said that the former Mahama government did not borrow directly from the Central Bank to finance the 2016 budget.
“I signed the Memorandum of Understanding (MOU) on No Loans with the Governor of the BOG, as an IMF conditionality under the IMF’s Enhanced Credit Facility (ECF) Agreement, even while we were going through the impact of the price of crude oil (2014 to 2016) and Nigerian Gas Supply Crisis (Dumsor), ”he said.
This comes after a fact check by an Accra-based radio station that said the NDC government under the leadership of former President John Dramani Mahama borrowed from the Bank of Ghana to finance the 2016 budget.
The NDC standard-bearer at the launch of the 2020 party manifesto said he financed the budget in 2016 with zero funds from the Bank of Ghana.
However, further questioning in the report dispelled the claim:
“Section 2.2 of the 2016 Annual Debt Management Report, which covers the government’s borrowing and financing operations, shows that the John Mahama administration borrowed GHS11.2 billion on the domestic market to help manage the deficit budgetary”.
“Of that amount, the government borrowed GHS 2.39 billion from the Bank of Ghana. The figure in this report was captured as the provisional figure for the end of 2016, which is an estimated figure.
“It is also worth noting that the government sought a net loan of 1.4 billion cedis from the Central Bank in fiscal year 2016,” based on this, the radio station concluded that Mr. Mahama’s claim is false.
In reaction to this, Mr. Tekper has questioned the content of the fact-checking report.
He said the NDC government did not borrow from the Bank of Ghana.
Read the full statement below:
As Minister of Finance at the time, I wish to clarify that the Mahama Administration did not borrow directly from the Government Bank to finance the 2016 Budget.
I signed the Memorandum of Understanding (MOU) on No Loans with the Governor of the BOG, as an IMF conditionality under the IMF Enhanced Credit Facility (ECF) Agreement, even as we were going through the impact of the price of crude oil (2014 to 2016) and Nigeria Gas Supply Crisis (Dumsor).
BOG performs various functions in financial markets for the government, including loan * on behalf of the government (MOF).
A) Loans to (on behalf of) the government from banks and individuals.
These short-term and medium-long-term loan instruments are called treasury bills, notes, bonds, etc.
By borrowing, they become GOG instruments and GoG loans.
See the breakdown of the instruments in Annex 1 of the Debt Report.
In the budget and debt reports, although the Banco de Guatemala is shown as the “source” of obtaining these loans, it does not mean that the Central Bank granted the loans directly to the government.
Therefore, it is a big mistake for FACT-CHECK to classify them as BOG loans directly to the Mahama government.
Note that the BoG itself is in the financial markets to lend and borrow to run the sector.
B) Loans from the BOG to the Government (directly, on its own account).
These are simply called short-term advances to the government on budgets and debt reports.
They are NOT shown in Appendix 1 of the 2016 Report because
(I) There was NO new BoG Advance in 2016 and before; and
(Ii) GOG and BOG agreed in 2014 or 2015 to convert the outstanding balance or the stock of past Advances into a long-term Bond.
C) Limit of 5% of the BoG in action
While the BOG Act ALLOWS YOU to make an Advance of up to 5 percent to the Government, as explained above, the IMF’s ECF Agreement did not allow the Mahama Administration to borrow from the BoG.
D) Conclusion
The only substantial amount that GOG received from BoG at that time was “Dividend”, as the sole shareholder of the Bank. This is usually shown as Non-Tax Income in the budget.
