Government has rejected claims by the Minority in Parliament that the recently issued Energy Sector bond required prior Parliamentary approval.
Speaking to the issue on the Citi Breakfast Show on Thursday, a Deputy Minister of Finance, Kwaku Kwarteng, said because such financial instruments are strategic, parliamentary processes may delay it which could eventually affect the interest rate.
He also argued that such bonds have not been brought to Parliament since the time of former President Jerry John Rawlings to John Mahama, hence it was unnecessary for the Minority to make such claims.
“When you go to the bond market, you are not in a position to sit down and agree on a set of terms, take it Parliament, come back and you get those terms from the different investors. It’s not possible. We think that this press conference was completely unnecessary, bad taste and misinformed…In the eight of years of Rawlings, Mills/Mahama, they’ve never brought any bond issue to Parliament so why are they now asking why we did not take it to Parliament?” he questioned.
Government issued a ten year and seven year bond with the aim of getting GHC6 billion to offset the legacy debts of the energy sector, which was about GHC10 billion.
But in all, a total of GHC4.69 billion was realized even after a seven day extension period.
The 7-year component raked in 2.4 billion cedis as targeted, at an interest rate of 19 percent.
However, the 10 year bond failed to hit the 3.6 billion cedis mark.
The Minority at a press conference on Wednesday accused the government of causing financial loss to the state with the energy sector bond.
According to them, the below GHc 6 billion yield was a solid basis for the Finance Minister, Ken Ofori-Atta, to be hauled before the House to explain why investment advice from places such as the IMF among others were ignored.
They also accused government of breaching the constitution because they did not seek the approval of Parliament before issuing the bond.
In his response, Kwaku Kwarteng explained that, the bond struggled because of the low interest rate of 19%, saying the investors wanted more, but government was not willing to go beyond 20%.
“We gave instructions to this company [ESLA Plc] that as a matter of government policy, we do not want you to take bond beyond 20%, and so that is how they went to the market. Now on the 7-year bond, the minority is right; some of the investors invested immediately, some of them said that they have been used to buying Ghana bond at 25% or 26%, which was under the previous administration, but why is that now you want to sell this bond and you are giving us this low, so we are not enthusiastic about it. That is the whole crux; it’s about the price on the bond.”
Mr. Kwarteng, who is also the Member of Parliament for the Obuasi West Constituency, said the New Patriotic Party government has a clear road-map on the bond going forward, and will not be forced to increase the interest rate.
“The NPP government is clear on what we are doing, we are not going to be pressured to give the kind of unhelpful and imprudent interest rates that we gave to investors. We will continue to engage and we are sure that at the end, we are going to get the money that we want,” he added.