Back Off! Terkper Is On Course…To Heal The Economy

Soon after the NDC assumed power in 2008, the then Trade Minister, Hannah Tetteh, summarized the health of the country’s economy when she said Ghana was broke!

Hannah Tetteh’s honest and candid admission hit the nail right on the head if other factors are considered and analyzed.

There is no doubt that the Kufuor Administration messed Ghana up financially before handing over the economy. Labeled ‘ The Looting Brigade’ by Ghanaians, they looted the treasury and left Ghana broke.

By 2007, Ghana was so broke that a leading member of the ruling NPP, Kwame Pianim, who is an economist said if Ghana Telecom was not sold and the money accruing invested into the economy, the economy will collapse.

It is worth noting also that by the end of 2007, the country, the state was so broke that the NPP government did not have a pesewa to pay the salary of workers. Kufuor and his henchmen thus had to dip their hands into the $750million Eurobond meant to pay the November salaries of workers that year.

A careful analysis of how the $750 million was acquired and spent explains how the Kufuor government squandered Ghana’s moneys, leaving a gaping hole for subsequent governments to fill. Below was the memorandum to Cabinet from the then newly appointed Finance Minister of the NDC government, Kwabena Dufuor on the Utilization of Proceeds from Ghana’s Eurobond transaction.

Presented by Dr. Kwabena Duffuor/Minister for Finance and Economic Planning

Information Memorandum on the Utilization of Proceeds from Ghana’s Eurobond Transaction

Action Required

Colleagues are respectfully invited to take note of the summary of the utilization of proceeds from Ghana’s 2007 sovereign bond transaction.


At its meeting on Tuesday 6th February 2007, Cabinet approved the issue of a sovereign bond of up to US$750million in international capital markets during 2007. The Ministry of Finance Economic Planning and the Bank of Ghana, through the Capital Markets Committee, undertook preparatory work towards the issue of the bond.

The preparatory work included the appointment of key advisors and service providers (lead and co-managers, international and local counsel, fiscal agent,) due diligence, preparation and filing of prospectus with regulatory authorities (Listing Authority of the UK) and a road show.

On July 30, 2007, Parliament approved by resolution a request by the government to borrow from the international capital market an amount up to US$750million at the prevailing interest rate on the date of the transaction and a maturity period of five to ten years to support the implementation of the medium term investment plan.

On September 27th 2007, the Republic of Ghana issued its debut US$750M 10-year bond. A summary of the issue details is presented below:

Issuer: The Republic Of Ghana

Ratings: B+ stable (S&P), B+ positive (Fitch)

Format: Reg S/144A

Amount: US$750million

Coupon: 8.50%

Issue Price: 100%

Pricing: Mid-swaps + 325 bps

Maturity: October 4, 2017

Settlement: October 4, 2007

Benchmark reference: UST 4.75% Aug. 2017

Spread to benchmark: 387 bps

Listing: London Stock Exchange

Joint Bookrunners: CITI, UBS

Co-Managers: EDC Bank, Databank, New World (Ghana)

Planned Utilization of Sovereign Bond Proceeds

The planned utilization of the sovereign bond was as follows:

Sector Planned Allocation (US$ millions)

Energy US$ 456.8

Roads US$ 198.6

Railways US$ 89.4

Issue Costs US$ 5.2

Total US$ 750.0

Actual Utilization of Sovereign Bond Proceeds

As at August 3 2009, a total amount of US$746.6 million had been disbursed.

A summary of the disbursements is as follows:
Description Amount (US$ millions)

Energy US$ 508.28

Roads US$ 92.27

Railways US$ 13.90

Others* US$ 126.95

Bank US$ 5.20

Total US$ 746.60

Disbursement Unrelated To Energy, Roads And Railways
Itemized below are the disbursements classified as “others”

*Interest on 1st Coupon to Citi Bank 14,000,000.00

*Purchase of 2225426 right issues shares of Anglogold 55,585,895.43

*VRA Crude Purchase 41,784,261.78

*Transfer to TCMA Account 2,452,129.72

*MOFEP Establishment of International Financial Services Centre 432,301.00

*Transaction Advisory Fees IFO NTHC/Databank for sale of Westel 982,000.00

*Ghana Telecom Bond Solicitation by Standard Bank 1,685,209.67

*Borrowing to support November 2007 Salaries 6,836,438.22

*SAS Transaction Fees for Golden Jubilee Savings Bond 174,033.85

*Exchange Rate Difference 3,017,730.33

*Total 126,950,000.00

From a comparison of planned versus actual allocations the following observations can be made:

• Energy allocation was overspent

• Very little of the railway allocation was used

Item Allocation Allocation Variance

Energy 456.81 508.28 (51.47)

Roads 198.61 92.27 106.34

Railways 89.38 13.90 75.48

Issue Costs 5.20 5.20 –

Others 126.95 (126.95)

750.00 746.60 3.40

The current Eurobond balance is US$3.4 million.

Colleagues are kindly requested to take note of the above.

Signed: Dr. Kwabena Duffuor
Minister of Finance and Economic Planning
Dated: 4 August 2009

From the text of the Finance Minister’s presentation to the Mills cabinet, it is clear that the NPP government’s Economic Team squandered the $750 million.

Today, in spite of the fact that Ghanaians are paying a whopping $38.8 million every six month as interest on the money and will continue to do so until 2017 when the principal ( $750 million) will also have to be paid, there was not even a metre stretch of road or railway that those who managed the Eurobond could have pointed to as having been what Ghana benefited from the Eurobonds.

This is the mess Kufuor bequeathed to the Mills government.

A news item by Joyfmonline on Monday, January 12, 2009 further points to the ill-health of Ghana’s economy at the time the NDC took over from the NPP. The condition of the economy was exacerbated by the hot potatoes Kufuor callously placed in the hands of President Mills before quitting, hot potatoes which Kwabena Dufuor was unable to deal with and which has till this day ensured that the economy is not placed on an even keel.

The Joy FM news item was headed “Osafo Maafo condemns Kufuor”. It stated that “Former Finance Minister Yaw Osafo Maafo says the new salary increases announced by the Kufuor administration was ill-timed.

With just a day to leave office, President JA Kufuor announced 16-32 per cent increases in salaries for workers in the public and civil service.

The increases formed part of the implementation of the single spine salary structure which has been deliberated upon for the past two years.

Even though he supports the implementation of the new salary structure, Mr. Maafo told JoyFM the decision should have been left for the incoming government.

With the global economic recession, the former finance minister reckons any increases in expenditure, especially the wage bills, without corresponding increases in revenue could be suicidal for the incoming administration.”

The Mills Administration, with pressure on it to provide basic amenities for the people had no time to correct the imbalances in the economy. The then Finance Minister had no choice than to pretend no problem exists and thus there was no gaping hole in the finances of the country occasioned by the lavish spending of Kufuor and his cronies.

All the mess stayed unattended till Seth Tekper took over.

The magnitude of the problem he inherited is enough to make him want to resign after his first day at the office. It must have dawned on him that the best foot forward for the country is to heal the economy first. This is what he has been up to, obviously, much to the displeasure of even die-hard NDC members who want it to be business as usual.

The process of healing the economy is what Ghana is being taken through currently. It is the pinch of the healing process that Ghanaians are feeling today. But it is the only way to ensure a permanently healthy economy for the country. It is for this reason that those who want to hound Seth Tekper out of office must back off.

Until the fundamentals of the economy are corrected, the nation will continue to sit on a time bomb.