My attention has been drawn to a letter by one Dr Robert Owusu-Gyeki, self-described as an economist/banker, supposedly responding to the issues I raised in my letter of January 29, 2019, headlined ‘CONCEALMENT AND MANIPULATION OF ECONOMIC DATA,’ and addressed to the Governor of the Bank of Ghana, Dr Ernest Addison.
Under normal circumstance, I would have allowed his politically-laced collection of words, inspired by theory rather than practice, to pass without a dignified response. However, I am compelled to respond for two main reasons:
1. Neither the Bank of Ghana nor its Governor, who are the primary subjects of my letter, has yet responded; publicly or privately. Instead, you, a faceless person whose identity does not show up anywhere, appear to be holding brief for our Central Bank through a letter whose contents are as shallow as floods on a mountain. While I strongly resist the temptation to believe that our Central Bank would stoop so low to the extent of using a faceless person to respond to issues as critical as those raised in my letter, the aura with which you displayed gross incompetence in the subject matter yet did so with confidence presupposes that my fears of Bank of Ghana using you to respond to me and in the process, misleading the public and investors are grounded. As such, I thought it wise to further set the records straight, not only to expose you and your inspirers, but to get the investor community to separate facts from misconceptions and even stop you from soiling the jealously guarded reputation of the International Monetary Fund (IMF) when you claimed that the Fund had granted Ghana dispensation to add encumbered funds to Net International Reserves (NIR).
2. By responding to your infantile positions, I am helping inform discussion on the critical issues I raised in my letter to the Governor. This should ultimately aid the public’s appreciation and understanding of same.
Having said that let me admit, conservatively, that you, the supposed Dr Robert Owusu-Gyekyi, displayed as well as expressed grave lack of understanding of the issues I raised in my letter. On that score, I am tempted to pardon you and instead, request that you humble yourself and submit to teachings so as not to blatantly expose yourself in subsequent encounters.
Before I proceed to expose the ignorance and blatant distortions in your letter, let me dare you to a public debate on the issues raised in my letter as and when you so wish. This will not only satisfy the public’s curiosity about who you truly are (that is if you indeed exist), it will help that same public to properly judge who among us understands the issues raised and is, therefore, not relying on textbook and third parties but using practical knowledge to discuss issues as critical and sensitive as those contained in my letter.
I wish to once and for all briefly draw your attention to the following issues;
1. In your letter, you argue that the Petroleum Holding Funds are not encumbered funds and that the IMF has agreed for Bank of Ghana to add them to our NIR. For the avoidance of doubt, please provide that agreement to the public to help exonerate yourself from going down as one lying to cover up for Bank of Ghana’s deceptive antics. It will further exempt you from lying about the activities of the IMF and the Government of Ghana.
While at it, please note that encumbered funds are funds that are restricted from usage because they have been set aside for a defined purpose. Thus, while proceeds of the Petroleum Holding Fund can count as part of Ghana’s gross international reserves (GIR), they cannot be part of NIR since they are not available for use by either the government or the Bank of Ghana until conditions for their usage are met. In fact, but for the absence of the Investment Advisory Committee (IAC), the Bank of Ghana would have had nothing to do with the Petroleum Holding Funds talk less of counting it as part of NIR, which is a collection of foreign currency resources that the Central Bank can use for monetary operation purposes as and when the need arises.
To further educate you, please avert your mind to Section 5 of the law that establishes the Petroleum Holding Fund. The Petroleum Revenue Management Act (PRMA) 2011 (Act 815) as Amended by Act 893 (2015), states “Prohibited use of Petroleum Holding Fund”.
“(l) The amount in the Petroleum Holding Fund earmarked for transfer into the Ghana Petroleum Funds, shall not be used;
(a) to provide credit to the government, public enterprises, private sector entities or any other person or entity, and
(f;) as collateral for guarantees, commitments or other liabilities of any other entity.
(2) In order to preserve revenue streams from petroleum and ensure the object of this Act, there shall not be any borrowing against the petroleum reserves”.
Clearly, what this means is that the Petroleum Holding Fund and the Ghana Petroleum Funds are neither available to the government nor the Bank of Ghana for use until provisions in the Act are satisfied. Instructively, those provisions include the exhaustion of 15 years from the date of the coming into force of the Act, which is 2011, and in the event of an emergency as clearly articulated in the Act.
Thus, it is totally false for one to claim that the Petroleum Fund are not encumbered funds and as such can be counted as NIR. Such a claim is not only informed by a position of ignorance, it falls flat in the face of the law. That is why the Central Bank, having deceived the public and investors by counting the Petroleum Holding Fund as part of NIR, is now unable to respond directly to me on the matter but hiding behind you to further attempt to deceive the public.
If we were to go by your logic, it means that Ghanaians could wake up one day to news that the Bank of Ghana has liquidated the Ghana Petroleum Funds, comprising the Heritage and Stabilisation Funds to support the cedi from falling further. Such an act would not only have been a gross violation of the law for which the Governor would have to answer for it, it would have also meant that the purpose for the two funds – future generations and safety against rainy days – would have been defeated with impunity.
Let me emphasise that the fact that funds denominated in foreign currency sit in Government of Ghana account at the Bank of Ghana do not make those funds part of BOG reserves until those foreign currencies have been sold or surrendered to Bank of Ghana.
2. In any case, let us assume that Bank of Ghana had a dispensation from the IMF to add the Petroleum Holding Fund to our NIR, why did Bank of Ghana not do so until November 2018 only to remove it from the data in December 2018, resulting in different data from what was published in November 2018? Did the supposed dispensation from the IMF say Bank of Ghana should add or remove it from the NIR as and when they wish? And is this to say that the IMF agrees to this manipulative inconsistency and fraudulent deception in compiling our economic data?
Check the data published for end of 2018 and compare with the published data to end November 2018 and you will see lack of credibility, clear manipulation and inconsistency in the same data set churned by no mean an institution than the Central Bank of Ghana.
3. Your gross lack of appreciation of the issues you sought to respond to reflected clearly in your position on the BOP and capital flight in respect of monetary policy objective to reverse the declining NIR resulting from excessive portfolio reversals. In analysing the BOP data, my focus was not a thesis on BOP characteristics as you seem to focus on. My view is to look at what would be directly affected by a Policy Rate cut (as has been the fixation of the Bank of Ghana since 2017) and not the composition of BOP. Clearly you seem to lack the ability to understand the alignment of Policy Rate to NIR behaviour for which I do not begrudge you. As a way of education, please note that a direct response in the BOP with Policy or interest rate is the capital account. Ghana suffered over US$1.2 billion of uncovered auction resulting from investors exiting the country’s bond market. If we had contained it, surely, our capital account would have improved by about US$1.2 billion and that would have consequently improved our NIR position. However, given your strength in theory as against the practice contained in my letter, you jumped to talk about current account. As indicated earlier, if the government were competent enough to stem that reverse flow of foreign currency investment, the Bank of Ghana would have been spared the agony of having to pump US$1.3 billion of NIR to support the cedi, which then left us in the current precarious external vulnerability.
But as we speak today, Ghana is suffering huge uncovered auctions or shortfalls in Government Borrowing Program due to the unattractiveness of our interest rates. What this means in plain terms is that investors are running away from Government of Ghana bonds and securities. The results of the various borrowing results of Government in January 2019 are alarming. If this trend continuous, our reserves will deplete further as growing fears of excessive portfolio reversals heighten in 2019.
Please see below the alarming numbers:
BOND ISSUANCE RESULTS FOR JANUARY 2019
|Security||Interest/Coupon rate||Planned Issuance Amount ¢||
Actual Realised Amount ¢
|Shortfall/Uncovered Action ¢|
|91-Day T’Bill||14.7%||1.4 billion||424.16 million||975.84 million|
|182-Day T’Bill||15%||700 million||178 million||522 million|
|364- Day note||18.2%||250 million||37.54 million||212.46 million|
|2-Year Bond||19.75%||1.00 billion||378 million||622 million|
|3-Year Bond||20%||800 million||387.33 million||412.67 million|
|TOTAL||4.150 billion||1.355 billion||2.795 billion|
From the table above, while government was expecting to raise GH¢4.150 billion for January to meet its maturing debt obligation and finance the budget, investors were only willing to lend just GH¢1.355 billion. The huge shortfall or uncovered auction of GH¢2.795 billion adds to the pressure of the cedi because the foreign fund managers who bring the foreign currencies to participate in these auctions are running away. This means we are losing the opportunity that loans provide to build NIR. This also means that our capital account of BOP is already experiencing poor performance, right from the first month of the year.
Clearly, this shows that investors are running away from buying Government of Ghana bonds and securities due to the unattractive interest rates even at almost 20% for 2-year bonds. Yet, the BOG is cutting policy rate in a manner that will further aggravate the situation. These are practical issues that impact the capital account, government borrowing and building of reserves. So, instead of doing a theoretical review of BOP and discussing current account that is largely from services, review the impact of the disastrous policy rate cuts on the capital accounts and NIR.
For the sake of emphases, your theories of Current Account and its impact on BOP deficit were not the basis for analysing the impact of the Policy Rate on portfolio investment reversals and depletion of foreign reserves but you launched onto it, typical of a person aiming at a convenient route to escape. Sorry ‘Doc’.
4. I realised your jaundiced analysis of GDP performance and your laughable conclusion that because GDP grew so high in 2017, it was normal that growth slows in 2018. Clearly, you are fixated with oil-driven growth, which unfortunately was not the basis of my analysis.
5. Mine was on the suffocation of the non-oil sector, where Central Bank policy decisions, led by the Policy Rate cuts, have failed to lift but rather stifling it further. It will interest you to note that the non-oil economy, which impacts directly on ordinary citizens and as such is the priority of Central Bank policies, performed abysmally in 2017 compared to 2016.
6. In 2016, the subsector recorded annual growth rate of 5%. That slowed to 4.8% in 2017. However, due to a jump in oil sector growth, buoyed by a recovery from the sector’s challenges in 2016 and increased investments in prior years, the oil sector expectantly registered strong growth and that ultimately overshadowed the weak growth in the non-oil sector. Therefore, your analysis is true for oil GDP because the government could not register any significant growth in the oil sector in 2018 over 2017 unless there was a significant increase in productive capacity (call it inherited growth), which was not feasible in 2018. In such a situation, one would have expected the non-oil GDP, which performed poorly in 2017, to recover in 2018 to fill the gap. Unfortunately, that did not happen, largely due to the Central Bank’s inability to use monetary policy to augment fiscal policy to help stimulate growth in the non-oil economy. Surprisingly, the languishing of growth in non-oil GDP continued in 2018 in spite of Bank of Ghana’s rate cuts.
7. Your silence on my other issue with the two different figures presented by the Bank of Ghana as overall BOP for December 2018 is telling. For the sake of the public, let me state that Bank of Ghana has silently changed the figure for Overall BOP in the Summary of Macroeconomic and Financial Data to mirror the USD671.5 million deficit that was captured in the MPC Press Statement after receiving my letter. The revised data is now posted on the Bank of Ghana’s website, although without any explanation whatsoever on how the figure changed from a deficit of USD1.28 billion that was earlier reported in the same document to the current deficit of USD671.5 million. Neither the general public nor the investor community has been notified of the revision to the data. If this is not deception and manipulative, what else is it? While I leave that for the public to judge, please note that this silent and unethical behaviour by the Central Bank as reflected in the change in the figure confirms my earlier position that more than USD600 million was fraudulently added to our NIR position as at December 2018 to increase the figure from USD3.2 billion to USD3.8 billion. That excess of USD600 million is the difference between the USD1.28 billion and the USD671.5 million that was ‘mixed up’ in the Bank of Ghana’s own data but has now been ‘rectified’ and the NIR padded, apparently to hide the true state of our reserves and the unprecedented draw down in NIR. Talking about drawdown and given your access to privileged information, as displayed in your response to me, could you please help us understand why the country suffered excessive drawdowns in NIR of about USD1.2 billion last year? What were the funds used for?
8. Finally, I want to urge you, Dr Robert Owusu-Gyekyi, to purge yourself of aiding and inspiring the Central Bank to manipulate economic data and provide fictitious Policy Rate cuts ostensibly to deceive investors. As I said earlier, please be bold and own up, if indeed you exist, to a one-on-one debate, call it discussion, on the issues in my letter and anything on the economy. As for the Bank of Ghana, the Ghanaian public and the investor community are the best judges on their active attempt to suppress information and deceive analysts into taking decisions that will be risky to them. Beyond it being unethical, it compromises the integrity of our Central Bank as an independent, credible and apolitical institution working to ensure stability in the economy.
ISAAC ADONGO (HON)
Member of Parliament (MP), Bolgatanga Central, and Member, Finance Committee of Parliament