$300-million credit facility accord illogical — Minority
The Minority in Parliament has described the $300-million credit facility agreement between Ghana and VTB Bank Capital of Russia to enhance the country’s participation in peacekeeping operations as illogical and unjustifiable.
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It has, therefore, advised the government to abandon the pursuit of the loan and focus on measures to address the economic challenges facing the nation.
Addressing a press conference in Accra on Tuesday, the Minority Spokesman on Finance, Dr Anthony Akoto Osei, said in the deal, VTB Capital was acting as the lender, arranger and facility agent, a development which was unusual, and added that the pact was “an unholy trinity of an arrangement” and engendered a conflict of interest situation on the part of the financial institution.
Apart from the issue of conflict of interest, he said the identity of the other co-lenders, their sources of funds and other crucial details were not known.
“Is it safe for us as a country to throw up our hands into the air and declare nonchalantly that we do not know the track record of those lending money to Ghana? In this era of money laundering and other financial malfeasance, how can we be sure that the other lenders are people or entities that we want to do business with?” he asked.
Background
In March 2014, the ministers of Finance and Economic Planning and Defence submitted a joint memorandum to Parliament requesting it to approve a $300 million credit facility between Ghana and VTB Bank Capital to further enhance the Ghana Armed Forces’ participation in international peacekeeping operations.
After an exhaustive process by the Finance Committee of Parliament, the Minority members on the committee declined to support the recommendation for the approval of the facility as presented to the House.
The committee’s report, which was ready on April 1, 2014, was not laid before the House.
This was because the Speaker, persuaded by the force of the arguments of the Minority, agreed that further consultations were needed in addition to the conduct of further due diligence and the creation of space for the Attorney General’s advice on some of the obligations of the lender and arranger.
However, the report, in its original shape and form, was laid before the House a few days before Parliament rose in July.
The Minority objected to the deal and, after a heated debate, abstained from voting.
The Majority, however, used its numbers to approve the agreement.
The Minority’s views
Dr Osei said in the past few weeks, VTB had entered the US market and was trying to source $1.5 billion from banks in the USA, a move which had hit a road block due to US and EU sanctions on Russia for invading Ukraine.
He said the Minority had warned the government of possible sanctions on leading Russian banks, including VTB, but that was ignored.
He said another sticking point with regard to the loan was the lack of proper due diligence by the National Security Secretariat and the Bank of Ghana, describing the report issued by both institutions as “an apology of a due diligence.”
According to Dr Osei, had it not been deficient, the due diligence report would have clearly indicated the possibility of sanctions on VTB and the political risks thereof.
With regard to the issue of value for money, he said the cost of contracting the loan did not make financial sense under current international credit conditions.
He said under the agreement, Ghana was being asked to pay an upfront fee of 1.85 per cent or $5.5 million and management fee of two per cent or $6 million, adding that it was outrageous.
“Who gets the management fees? Are we paying VTB for managing its own loan portfolio? Or is it the case that VTB is going to pay some other party to manage its own loan portfolio? If it is the former, one should raise a red flag as it arouses suspicions. If it is the latter, it would simply mean that VTB is incompetent to manage its own portfolio,” he said.
Dr Osei said the Attorney-General and Minister of Justice, after studying the loan documents, advised caution but the government ignored it and rather went ahead for it.
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