8 March 2018

Ghana: Minority Demands From Finance Minister Information On Liquidation of Capital, UT Banks

The Minority in Parliament has written a letter to the Minister of Finance, Ken Ofori-Atta, requesting information on what it said is "three technical issues that remain outstanding."

Jointly signed by the Minority Leader, Haruna Iddrisu, and Cassiel Ato Forson, the caucus' Ranking Member on the Finance Committee, the outstanding issues bothered on the liquidation of the Capital and UT Banks, cut-off rules: end of 2016 debt service amount and the adjustment of end-2016 arrears by GHC7 billion.

Sighted by the Ghanaian Times, the letter, dated March 5, 2018, is copied the Auditor General, the Country Representative of International Monetary Fund (IMF), the Country Director, World Bank and the Majority Leader.

On the liquidation of the two banks, the Minority by the letter said, the impression was created that the Ghana Commercial Bank (GCB) was to absorb the assets and not the liabilities of the two banks

Contrary to this, the letter said an IMF staff report suggests that the GCB will receive GHC1.6 billion government bonds, representing 0.8 per cent of the country's GDP, to balance the assets and liabilities of the two defunct banks.

"This means that the taxpayer is to bear the cost of the liquidation through the issuance of a GHC1.6 billion bonds" the Minority stated revealing that it raised the issue at the Finance Committee level with the Governor of the Bank of Ghana and were assured that the 2018 budget would be used to clarify the situation to the public.

"Needless to say that this did not happen, despite the potential for substantive increase in the public debt and tax burden.

"We urge you, Honourable Minister and Governor, to respond immediately and explain the entire circumstances of the liquidation to Ghanaians, who will be forced to bear the brunt of the liquidation," the letter said.

On the end-2016 debt service amount, the letter said they objected to the decision by the Finance Minister to reverse entries made in January 2017, being debt accrued for service commitments for end-December 2016 because it was against accounting rules that applied to weekends and public holidays.

For more than two months since the 2018 budget was presented, the Minority caucus said the Finance Minister was yet to pronounce on the implications of the rule change just as the governor of the Bank of Ghana failed to when presenting the Monetary Policy Committee report earlier this year.

"We, therefore, wish to make formal request on the matter to the Minister and the Governor, to appraise the Minority of the full implications of the rule change" they demanded.

According to the Minority, the adjustment of end-2016 arrears by GHC7 billion, which they opposed, has resulted in a significant increase in the deficit to 10.9 as reported by the Finance Ministry by it's mid-year fiscal policy review of the 2017 budget statement.

The letter said the Vice President, Dr. Mahamudu Bawumia, at the New Year School noted that the amount was GHC3.1 billion; far lower than the GHC5 billion cited in the 2017 mid-year review review statement.

Surprisingly, the Vice President, at the same New Year School, stated that the deficit for 2016 was still 10.9 per cent on commitment basis, the letter noted.

"As we noted, in response to the Vice President, the lower figure of GHC3.1 billion should result in a lower deficit for end-2016.

"In fact, the deficit is also expected to be lower from savings arising from the audit of these contracts as the Mahama administration did after the audit of BDC forex loss and subsidy claims; payroll audit; and potentially the audit of forex provisions in domestic contracts", the Minority noted insisting that the outcome of the audits must be made public.

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