World Bank Drops GCB Conditionality

The Government will announce on Friday, August 15, its decision on whether or not to sell the remaining 46.8 percent share the state still holds in Ghana Commercial Bank buoyed by information that the World Bank has dropped its conditionality of tying the sale of the state shares in the bank to the Breton Wood institution's support of Ghana's economic programmes.

Although, no similar gesture has come from the International Monetary Fund, Public Agenda can predict that the state will retain its shares when the announcement is made on Friday.

Feelers Agenda put through to the North Ridge offices of the World Bank in Accra, picked up snipers of World Bank's new policy of not attaching conditional ties to its support for fiscal policies of the Government of Ghana. No official reason has been given for the sudden change of heart at the World Bank's North Ridge offices of the Country Director. But whatever influenced the new directive could not have been unconnected to public outcry against the proposed sale of the state's remaining shares in GCB.

The World Bank has of late been re-inventing itself in Ghana following the events that forced the bank to relocate Peter Harold from Accra to Colombo. Since the arrival of Mats Karlson, a Vice-President of the World Bank a year ago as Country Director, the bank has been involved in transforming itself to make it appear friendly in the face of public rejection of its conditional ties.

Sources Agenda spoke to say the World Bank would support the Ghana Commercial Bank especially to restructure itself whether or not the state retains its shares.

"We have been worried about the way various governments fall on the resources of GCB without regard to its viability. The way it was milked to sustain TOR (Tema Oil Refinery) for instance, is unacceptable. GCB almost went down because of the way it was milked to offset the TOR debts. We're concerned that Commercial Bank could go the way of Bank for Housing and Construction and Co-Operative Bank went."

The sale of the remaining 46.8 percent share the state has in GCB has become an explosive minefield for the Government of John Agyekum Kufuor as the New Patriotic Party Administration prepares to face the electorate to defend its record in office next year.

An IMF document spelling out the fund's demand for full privatization of GCB stated that the state control of the bank distorted its lending decisions. Putting depositors and shareholders at risk In the Memorandum of Economic and Financial Policies of the Government of Ghana for 2003-2005, the IMF stated emphatically that the restructuring of TOR should clear the way for the privatization of GCB, the refinery's main creditor.

"The divestiture of GCB is sufficiently important from the point of view of the overall soundness of the banking system. That it will serve as a structural benchmark under the Government's Poverty Reduction Growth Fund (PRGF) - supported programme for 2003, with a target of not less than September 30, 2003 for Cabinet to approve the winning bid," according to an IMF document Agenda sighted.

The IMF document stated among others that the massive lending to TOR virtually crippled the bank and necessitated three government bailouts in the last three years. The document alleged that the lifeline given to GCB cost the taxpayer c2 trillion which could have been used in the fight to reduce poverty.

The IMF also argued that that GCB's open-ended soft lending to TOR allowed the refinery to delay reforms of its own operations. TOR, according to the document, also delayed implementing effective pricing mechanism for petroleum in Ghana because of the GCB bailout. "If GCB were under private sector control, these distortions could be removed," the document stated.

But civil society and many ordinary Ghanaians who were opposed to the sale countered this. The Integrated Social Development Centre, an NGO, which spearheaded the campaign, argued that the proposed sale would only go to benefit foreign multi-national financial institutions against the welfare of this country.

"Given the central role the banking sector plays in our development, we argue against privatization of GCB For us, Ghana Commercial Bank represents the next line of defence in our struggle to protect the rights of all to essential services like banking.

ISODEC threatened a long and protracted war to block the proposed sale.

Several Ghanaians added their voice to the ISODEC call. The Professional and Managerial Staff of the bank weighed in heavily against the sale. "We are convinced that the entire sale of government shares (and part of those of SSNIT) in GCB to a strategic investor will not be in the interest of Ghana.

Quoting statistics from Ghana Living Standards Survey, which documented poverty as a rural phenomenon to buttress his point, a spokesman for the workers, Antwi Danso, Deputy Manager of GCB said the bank out of the need to reduce poverty using financial inter-mediation.

While the debate was heating up, a consultant to the World Bank, Prof Tony Killick, who is an alternate development consultant, suggested that the government and people of Ghana could reject donor conditional ties if they were not suited to the economy.

"Aid dependency doesn't have to mean donor domination," Prof Killick told an Evaluation of the Comprehensive Development Framework meeting in Accra.

Irked by the overwhelming opposition to the sale, Finance Minister Yaw Osafo-Maafo said the decision to sell or not would not be dictated by emotions. He said Government would take the decision based on a report of a committee set up to evaluate the sale.

Of late, however, President Kufuor is sounding more reconciliatory on the sale. On tour of the Greater Accra Region, the President said his government would listen to public opinion before announcing its decision on Friday, August 15.

If public opinion is anything to go by, the 46.8 percent share in Ghana Commercial Bank is safe in public hands.