Information Minister Misinforms About $3BILLION CHINESE LOAN

Last week Thursday, the Minister of Information, Hon. Mahama Ayariga engaged the press and related to the $3billion Chinese loan which the NDC government has since July 2011 been pursuing. The kernel of the communication from the Minister was that the government of Ghana has now sorted out every relevant documentation and that the $3billion facility is on its way to Ghana and that, pretty soon, the anticipated projects would begin in earnest. The Minister thereafter obliquely lampooned doomsday critics who had suggested that the facility would not materialize. In respect of this particular loan facility, the NPP Minority Caucus were the group that called for caution and better due diligence to be conducted. We were ignored and the ruling party, using their greater numbers, railroaded the agreement through Parliament. Two years after the maddening speed of passage and with the money not having yet arrived, one would have thought that government was going to do serious introspection, but not so for a government, whose stock-in-trade is bare-faced propaganda. On September 27, 2011 when we held a press conference on this subject matter we serenaded that the intentions behind the facility are good but we questioned the terms and conditions of the contract. We conceded though that many of “the projects to be covered by the loan are worthwhile for the country”. Now that the Minister is shifting the goalpost it is important for us to reposition the issues raised at the time on the front burner. First, we stated that tranche A of the $3billion facility is for 15 years. It provides for the collateralization of our oil revenue (i.e. for the $1.5billion segment for 15 years). Section 18(7) of the Petroleum Revenue Management Act restricts the collateralization of oil revenues for debts for a period of not more that 10 years. The $3billion Chinese loan is in breach of this Act. We in the NPP still stand by this. Second, the 1st Schedule of the Master facility Agreement (MFA) for the $3billion Chinese loan required “the government of Ghana to show evidence that Ghana’s Parliament had approved and authorized the borrowers (GOG) entry into the finance documents”. The principal finance documents included the Subsidiary Agreements, the Five-party Agreements and the Off-Taker Agreement, among others. These are all international economic transactions which Parliament is obligated by Article 181 (3)(4)&(5) of the 1992 Constitution to approve. Further, the MFA required GOG to make all those approved documents available to Chinese Development Bank (CDB). Aside the constitutional imperative, doesn’t it sound logical and indeed commonsensical that the representatives of the people on whose behalf a loan facility is to be contracted are made to see and approve of such documents before government contracts the loan? We still hold the opinion that it was wrong, indeed a breach of both the Constitution and the MFA, that Parliament “approved” of the Agreement without approving of the principal finance documents. Third, the total listed projects to be financed by the loan amounts to $3.25billion. The loan is $3billion. GOG is to provide 15% counterpart funding which translates to $450 million. The total resource in the envelope comes to $3.45billion. Therefore there is an excess funding of $200million which was not accounted for in the loan document. The Cabinet Memo did not mention it either. The Minority side raised issues about what the $200 was going to be used for. We insist there was nothing known about this $200million. Fourth, we cautioned about debt sustainability. At the end of 2008, the national debt was $8.1billion (par. 94 of 2009 Budget Statement). In December 2011 the debt had reached $16.5billion and the $3billion took it to almost $20billion in less than 3 years of Professor Mills’ rule. In less than 3 years of the Mills-Mahama administration total approved loans had risen to over $12billion out of a total of $18billion brought to Parliament. We insisted and still insist that these have serious implications and raise serious questions of debt sustainability. Fifth, the MFA requires us to pay 1% of the loan as commitment fee which thus translates to $30million at the outset. The MFA stated a fee of 1% of the undrawn balance. However, the Cabinet Memo, which was repeated in the Finance Committee’s report, requested Parliament to approve of a fee payment of 1% per annum of the entire amount and not the undrawn balance which would have amounted to $375million. It was through the vigilance of and the diligent objection by the NPP Minority that the Speaker ruled for amendment. Through this singular act the nation was saved hundreds of millions of dollars! Sixth, is the upfront fees of 0.25%. Indeed page 27 of the Loan Agreement stated a one-time payment of 0.25% or $7.5million. However, the Mills-Mahama Cabinet Memo to Parliament (paragraph 5, pg 8), stated that upfront fees are to be paid every year for 15 years. Parliament’s Finance Committee repeated this demand on page 4 of their report. That meant the country was to pay $93.7million. It took the eagle eyes of the NPP to stop this and by that we saved the nation a whopping $86.2million. Seventh point: The Chinese requested that Ghana commits to sell oil through GNPC to the Chinese Off-Takers to offset the loan. No commitments were imposed on the Chinese. That is why we pointed out that the ills of the STX Agreements were being re-imposed on the state, whereas, just like the STX Agreements, the Chinese counterparts had virtually no risks. This was another paramount concern that we raised. As we speak, those concerns have not been mitigated. Again, we questioned the feasibility which had gone into the execution of the projects identified. It became clear to us that no proper feasibility had been conducted. For instance, in the Agreement the Coastal Fishing Harbours and Landing Sites Project had been quoted as requiring between $150million and $250million, a gap of $100million. For the Eastern Corridor Multi-Modal Transportation Project the price quoted was $150 – $500million. The gap in that one alone is $350million. For the Accra Metropolitan ICT-Enhanced Traffic Management Project the cost was quoted as $150 – $200million. The gap is $50million. These three projects could potentially be executed at $450million. Instructively, government in computing the various project costs which amounted to $3billion, used the price ceilings and the total of these three projects came to $950million. The question we posed then was, assuming we are able to execute them at least cost what happens to the unutilized component? The looseness of such broad banding certainly would create room for consultants and contractors to inflate the cost of projects. Manifestly, this arrangement will create space for corruption and fraudulent manipulation of project cost and the nation will not have value for money. Furthermore, the $3billion facility covers the Accra Metropolitan ICT Enhanced Traffic Management Project. Aspects of the Nsawam road, the Dodowa road and the La Beach road have been provided for in the loan and yet the Minister of Finance had raised bonds to pay contractors on these same roads. The issues raised were in respect of the fact that the Minister of Finance had not come to Parliament for approval to raise the bonds. Also, it was required of the Minister to come to brief Parliament about the state of indebtedness to the contractors now that he is seeking to use part of the Chinese loan to cover the same programmed roads, otherwise there could be double payments for same works. The Minister of Finance is yet to respond to these. Tenth point: Clause 3 in the MFA provides that a minimum of 60% of the contracts should be awarded to Chinese companies. Our concern is that this “minimum” requirement means that potentially 100% of the contract could go to Chinese companies and the Agreement would not be breached. We wanted government to renegotiate this to, say, a “maximum” of 60% or even 70% so that we could have a minimum of 30% or even 40% reserved for Ghanaians. What happened to the much touted local content? And this is a purely commercial loan, not a grant or even a concessional loan! On top of all these, the $3billion Chinese loan Agreement provides for many of the projects to be built, operated and transferred to Ghana. Usually, a contractor operates a project where the contractor is the investor. The period of operation enables the operator to recoup his investment before transfer. In this agreement government is funding the project 100% through a commercial loan. So why are the contractors going to operate projects they have not invested in? The nation demand answers. Finally, at that time of the approval of the loan we reminded government about their own agreement with the IMF which sought to preclude the country from contracting non-concessional loans worth more than $800million. It was upon our insistence that later the then President, Professor Mills and the Finance Minister sought and obtained approval IMF. We concluded by suggesting that not only were we as a nation not going to have value for money but that the path to the loan was strewn with potential corruption and fraud. We thereafter proceeded to offer alternatives. Our information is that as of now the gas project is the only one that has started in earnest, even that one run into some challenges and works were halted by the Chinese. Our request for the gas contract to be brought to Parliament for scrutiny and possible approval has thus far not been heeded in obvious contravention of Article 181(5). We hereby serve notice to the Minister of Finance that he will be required to be in Parliament to answer why the gas contract is being executed but the subsidiary agreement relating to the project has not come to Parliament. Most of the issues that we raised remain unresolved so for the Minister of Information to make so-called allegations that the loan facility would not materialize (by whom and at what forum?) his centre piece is, to say the least, most unfortunate. We had thought that with Hon. Mahama Ayariga as the Minister of Information the nation was going to witness a new era but increasingly, he is reclining to the path of propaganda. The nation cannot derive any benefit from this, Minister. We insist that these are very serious matters that the Minority in Parliament raised in respect of the $3billion Chinese loan. No amount of propaganda or goal-post shifting could address.