Former Finance Minister and lead partner for tax firm, PFM Tax Africa, Seth Terkper has reacted to the assertion by Fact Check Ghana – a fact checking project of the Media Foundation of West Africa – that the erstwhile John Mahama administration borrowed from the Central Bank in 2016.
The flagbearer of the NDC, John Dramani Mahama at the launch of the party’s 2020 manifesto delivered a speech justifying his reelection bid with his track record of economic performance. The former president then claimed that his administration managed the 2016 budget with zero borrowing from the Central Bank.
On the back of the statement made by the former President, Fact Check Ghana sought to verify the claim made by Mr Mahama.
According to Fact Check Ghana, an analysis of the 2016 Annual Debt Management Report for the year 2016 as submitted to parliament in fulfillment of requirements of Section 72 of the Public Financial Management Act 2016 (Act 921) saw the John Mahama-led administration borrow some Ghs 11.2 billion from the domestic market to help manage the budget deficit.
Out of the said borrowed amount, Fact Check Ghana asserts that, Mr Mahama’s administration as a provisional figure for end-December 2016, net borrowed Ghs 2.39 billion from BoG.
Fact Check Ghana also states that, to ascertain if the provisional figure was the same in the actual amount borrowed, it checked the 2017 Annual Debt Management Report and discovered that on page 13 the 2016 outturn report which represent the actual amount borrowed from the central bank, Mr Mahama’s government Ghs 3.15 billion cedis.
Fact Check Ghana posits that not only is Mr Mahama’s claim at the manifesto launch false, but also the amount borrowed from the BoG contravenes the amended Bank of Ghana (Amendment) Act, 2016 (Act 918) which states that borrowings from the Central Bank by government should not be more than 5 per cent of its (government) previous year revenue figures.
But responding to the assertion made by Fact Check Ghana, Mr Terkper corroborated Mr Mahama’s assertion that his government did not borrow from the BoG in 2016.
He states that, the Central Bank performs numerous roles for government on the financial markets some of which include borrowing for and on behalf of government from banks and individuals by offering short-term to medium-term loan instruments in the form of Treasury Bills and Bonds.
According to him, upon borrowing, these loan instruments become Government of Ghana (GoG) instruments and loans. So despite the BoG being shown as the “source” of the loans secured in the Budgets and Debt Reports, it does not mean that the Central Bank did the lending directly to Govt.
Mr Terkper therefore described as a big mistake for Fact Check Ghana to classify these loans as BoG lending directly to the Mahama government.
Arguing further, Mr Terkper stated that while the BoG Act only allows an advance of up to 5 per cent to government, the IMF Extended Credit Facility (ECF) Agreement did not allow the Mahama administration to borrow from BoG, concluding that the only amount the Mahama administration got from BoG was dividends as the sole shareholder of the Central Bank.
The only substantive amount that GOG received from BoG at the time was “Dividend”, as sole shareholder of the Bank. This is routinely shown as Non-Tax Revenue in the budget.
Seth Terkper
