A former Minister of Finance, Mr Seth Terkper, has disagreed with the government’s explanation that the recently discovered discrepancies in the allocation of petroleum revenues were due to the movement of the funds between the Treasury Single Account (TSA) and the Treasury Main Account (T-Main).
He, however, sided with the Public Interest and Accountability Committee (PIAC) that portions of the petroleum revenues were unaccounted for and possibly applied on projects and programmes outside the defined scope.
In an article due to be published in the Thursday edition of the Graphic Business (which is an insect in the Daily Graphic), Mr Terkper said the explanation that the Ministry of Finance (MoF) transferred GH¢403.7 million from the T-Main to the TSA meant that they were ‘swept’ and consequently used for consumption.
Sweeping is a financial activity that allows managers of a fund to transfer revenues in excess of a particular amount into another fund or account.
Mr Terkper added that the action of the ministry through the Controller and Accountant General’s Department (CAGD) was inconsistent with aspects of the 1992 Constitution.
He cited Articles 175 and 176 (1) and (2) of the Constitution and portions of the Public Financial Management Act, 2016 (Act 921) (PFMA) and the Petroleum Revenue Management Act, 2011 (Act 815) (PRMA) to buttress his point.
“While there may be overlaps, the MoF view is not consistent with Chapter 13 (Finance) of the Constitution since the T-Main and TSA are part of the Consolidated Fund, with the same status as other public funds.
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“The TSA is a cash and treasury management tool while the T-Main pools and often “sweeps” multiple accounts, including some public funds, to legally allocate money and prevent their deliberate misuse by banks and other agencies,” he said.
In the article, Mr Terkper further warned that the country needed to “resist the urge to spend or consume petroleum revenues at the expense of debt management, investment and contingency goals.
“The conventional goal of sweeping to centralise idle funds must respect the PRMA rules.”
He further wondered why the country had stopped transferring money from the ABFA to the Ghana Infrastructure Fund (GIIF).
“And since paying off the 2007 Sovereign Bond, we have not made any further redemptions, even though we are adding to total public debt.
The current attempt at sweeping, presumably for consumption or recurrent expenditure, will further dilute the purpose of the PRMA,” he said.
While admitting that the T-Main and TSA could be used to check abuse and manage idle balances, he said they “must not sweep the petroleum funds outside the PRMA rules for channelling funds to the budget”.
“The main TSA/T-Main goal under the PFM and Ghana Integrated Financial Management Information System (GIFMIS) reforms is to prevent banks from lending idle government funds to the government.
“Given technology, the “pooling” of account balances no longer involves physical cash movements since the Controller obliges banks to give ‘electronic view’ of these balances,” he said.
Mr Terkper said past MoF sweeps resulted in inevitable mistakes, leading to serious fiscal implications.
He noted that governments always came under pressure to move funds from buffer or stabilisation and investments funds into consumption. However, “to yield is not to use our natural resource endowments effectively to achieve a desirable fiscal balance”.
He recalled that in 2014 and 2015, the government came under intense pressure under the IMF programme to ‘sweep’ the Sinking Fund and GIIF to reduce the deficit but resisted it.
That, he said, ensured that the country built enough buffers to be able to take off the remainder of the country’s maiden sovereign bond when it matured last year.
“Had we succumbed, we would have had difficulty in redeeming the 2007 Bond, as well as missed the opportunity to use GIIF to support construction of the elegant Terminal Three at Kotoka International Airport (KIA).
“More importantly, we will stand accused, as some nations, for using our oil revenues for consumption.
“The PRMA is achieving its investment, spending, stabiliser, heritage and contingency goals and we must protect it,” he noted.