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 the erstwhile Mahama government did not borrow directly from the Central Bank to finance the 2016 Budget.
“I signed the Non-Lending Memorandum of Understanding (MOU) with the Governor of BOG, as an IMF Conditionality under the IMF Enhanced Credit Facility (ECF) Agreement, even as we went through the Crude Oil Price Shock (2014 to 2016) and Nigeria Gas Supply (Dumsor) crisis,” he said.
This comes after a fact check by an Accra based radio station 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’s flagbearer at the party’s 2020 manifesto launch said he financed the budget in 2016 with zero funding from the Bank of Ghana.
Further interrogations of the report however dispelled the claim:
“Section 2.2 of the 2016 Annual Debt Management report, which covers government borrowing and financing operations, shows that the John Mahama administration net borrowed GHS11.2 billion on the domestic market to help manage the budget deficit”.
“Out of that amount, government net borrowed GHS 2.39 billion from the Bank of Ghana. The figure in this report was captured as the provisional figure for end year 2016, which means an estimated figure.
“It is also worth noting that government sought to net borrow GHS1.4 billion cedis from the Central Bank in the 2016 fiscal year,” based on this, the radio station drew a conclusion that the claim by Mr Mahama is false.
Reacting to this, Mr Tekper has challenged the content of the fact check report.
He said that the NDC government did not borrow from the Bank of Ghana.
Read full statement below:
As the Minister for Finance at the time, I wish to clarify that the Mahama Administration did not borrow directly from BoG to finance the 2016 Budget.
I signed the Non-Lending Memorandum of Understanding (MOU) with the Governor of BOG, as an IMF Conditionality under the IMF Enhanced Credit Facility (ECF) Agreement, even as we went through the Crude Oil Price Shock (2014 to 2016) and Nigeria Gas Supply (Dumsor) crisis..
BOG performs various roles on the Financial Markets for Govt, including borrowing *on behalf of Govt (MOF).
A) Borrowing FOR ( on behalf of ) Govt from Banks and individuals.
These short-term and medium-to-long term loan instruments are called T-Bills, Notes, Bonds etc .
Upon borrowing, they become GOG instruments and GoG loans.
See the breakdown of the instruments in Appendix 1 of the Debt Report.
In the Budgets and Debt Reports, while BoG is shown as the “source” of securing these loans, it does not mean that the Central Bank did the lending directly to Govt.
Hence, it is a big mistake for the FACT-CHECK to classify these as BOG Lending directly to the Mahama Govt.
Note that BoG ITSELF is in the Financial Markets to lend and borrow to manage the sector.
B) BOG Lending TO Govt (directly, on its own).
These are simply called Short-term Advances to Government in Budgets and Debt reports.
They did NOT show in Appendix 1 of the 2016 Report because
(I) there was NO new BoG Advance in 2016 and earlier; and
(Ii) GOG and BOG agreed in 2014 or 2015 to turn the outstanding balance or stock of past Advances into a long-term Bond.
C) BoG 5% Limit in Act
While the BOG Act ALLOWS it to make an Advance of up 5 percent to Govt, as explained earlier, the IMF ECF Agreement did not allow the Mahama Administration to borrow from BoG.
The only substantive amount that GOG received from BoG at the time was “Dividend”, as sole Shareholder of the Bank. This routinely shown as Non-Tax Revenue in Budget.