The Member of Parliament for Bolgatanga Central constituency, Isaac Adongo has cautioned the Governor of the Bank of Ghana (BoG) over his suggestion that the bank will surrender $300 million of the Special Drawing Rights (SDR) to government to fund the 2022 budget expenditures.
Mr. Adongo, in a letter addressed to Governor Ernest Addison, described the suggestion as “most unfortunate and a perverse interpretation of the rules that govern your mandate.”
He added, “it will not be far-fetched to suggest that you are willing to surrender your fiduciary responsibility to protect the resources of BOG and uphold its laws.”
Mr Adongo explained that indeed the said suggestion is in breach of several Acts including the Public Financial Management Act, The Bank of Ghana Act, 2002 (Act 612) and its Amendment, 2016 (Act 918); and do not fulfil the purpose of the SDR as proposed by the IMF.
The International Monetary Fund had established a $650 billion increase in special drawings rights (SDR) of several member countries.
This was distributed to member countries’ Central Banks to augment their foreign reserves that have been constrained by Covid-19’s disruption of global supply chains and its attendant effects on foreign inflows from exports.
Unlike the RCF fiscal support to governments, these monies were rightly paid directly to BoG account as assets of the central bank and not government accounts with it.
Mr. Adongo explained that “SDRs are only an equivalent in a trading currency and cannot be converted into cash in any currency without interest accruing to the country that holds that currency as its proprietary legal tender.
“The IMF provides daily interest rates and currency conversion rates for SDRs. As you may be aware, Ghana stands to pay interest on its shortfall of the initial holding of SDRs released to it by the IMF.
“Your view that SDRs constitute ‘free money’ to be distributed at your discretion, based on a convoluted interpretation of the laws of Ghana and best international practice, must be reconsidered.”
He added, “I believe that the above considerations guided the IMF in suggesting that even though member governments decide the utilisation of the SDR, it must be done in compliance with the governance frameworks of member countries.”
He argues that Covid-19 may not be a justifiable reason for dispensing the SDR to the government as the Constitution had made provisions for instances of such crises.
“You may be aware that the Bank of Ghana Act, 2002 (Act 612) provides in section 30(6) that in the event of an emergency, the Governor, the Minister, and the Controller and Accountant General shall meet to decide the limit of borrowing that Government should make following which the responsible Minister (of Finance) shall submit a report on the issue to Parliament within seven sitting days,” he stated.
He added that despite there being a clear breach of the above Act, the BoG had failed to seek parliamentary approval after exceeding the five percent threshold of borrowing to government.
“The BOG Act and its Amendment Act do not provide for freebies from BoG to Government. Instead, it imposes responsibility on you to report to the Minister anytime the 5% threshold is exceeded. The finance minister then reports to Parliament with a clear program to remedy the violation. Unfortunately, these have not been complied with,” he said.
The MP for Bolga Central says should the BoG go ahead with offering $300 million of the SDR to government it will aggravate the breaches of the 5% threshold.
“If you were unaware of the provisions of your own Act, I do hope that my letter draws your attention because willful breaches of the law do have consequences, usually dire. Also, bear in mind that I reserve the right, as a citizen and Member of Parliament, at a time of my choosing to activate legal action that may crystalise such legal consequence,” he cautioned.
“I will strongly urge you to remedy your earlier plethora of breaches of the BoG laws. However, while I understand the unbearable pressure you may be experiencing from the Executive arm of Government to disregard your own laws, please be mindful of the potentially dire consequences and remain resilient,” he concluded.
