BoG pays property developer $36m during Ghana’s worst forex crunch – Auditor-General’s report reveals

Source The Ghana Report

The Auditor-General in its 2022 report has revealed that Bank of Ghana (BoG) made payments worth $35,909,067.50 to Goldkey Properties Limited for the construction of a new corporate office in Tamale.

Checks reveal total progress payments to contractors for the period under review were US$117,150,255.37 compared with US$32,246,487.75 for the corresponding period of 2021, representing an increase of US$84,903,767.62 or 263.3%.

According to the report, “the upsurge was attributable to the construction of Bank of Ghana (BoG) Corporate Office in Tamale and Sports infrastructure for the hosting and organization of the 13th African Games, Accra 2023 accounting for 30.7% and 30.5% respectively of the total amount of US$117,150,255.37”.

These payments including the one made to Goldkey Properties for the construction of the Tamale corporate head office took place in 2022 when Ghana was experiencing one of the worst exchange rate depreciation against the US ‘greenback’.

As a result, sovereign spreads on Ghana’s Eurobonds widened, and Credit Rating Agencies further downgraded Ghana’s sovereign debt rating. This effectively blocked Ghana’s access to the international capital markets in 2022, a resource which the budget had relied on to borrow about US$3 billion annually to help close the financing gap.

As reported by the central bank, the loss of access to the international capital market for securing new funding had an immediate and cascading impact on the Government, giving rise to a liquidity crisis. This crisis subsequently spilled over into a broader balance of payments crisis, as the country was compelled to continue meeting its commitments related to debt servicing, energy payments, and import expenditures.

In the process of fulfilling these crucial external obligations, the Bank of Ghana saw a depletion of US$500 million in external reserves within just a span of two months. Moreover, there were no incoming flows of foreign currency from the usual annual issuance of Eurobonds by the Government to replenish these reserves.

2022 forex crunch

Indeed, throughout the first half of 2022, Ghana experienced a severe scarcity of fresh foreign financing. It wasn’t until July that the African Export-Import Bank (Afrexim Bank) intervened, providing vital support amounting to US$750 million.

Ghana’s dire need for foreign exchange was palpable during this period. Amidst this crisis, the Bank of Ghana incurred an astonishing loss of approximately $6 billion, which is twice the anticipated bailout package Ghana expects to receive from the International Monetary Fund (IMF).

This substantial loss was attributed to the Bank’s decision to accept significant reductions in both principal amounts and interest payments on government debt owed to it. This decision became imperative when Ghana had to implement a painful Domestic Debt Exchange Programme (DDEP), which entailed the restructuring of approximately $8 billion of its domestic debt. The IMF Country report released in May 2023 warned that the Bank of Ghana’s balance sheet could be affected by the debt restructuring, and requested that the Government and the Bank of Ghana be required to assess the impact and develop plans for its recapitalization with technical assistance support from IMF.

While all other participants in the Domestic Debt Exchange Programme (DDEP) received new financial instruments with adjusted tenors and coupon structures without any reductions in their principal amounts, the Bank of Ghana played a pivotal role as the entity responsible for absorbing the losses incurred throughout the entire debt exchange program.

This was a critical condition that enabled the Government of Ghana to satisfy the criteria necessary for the approval of the IMF programme. Consequently, the Bank of Ghana had to absorb a 50% reduction in the total principal amount.

Apart from the significant losses incurred in 2022, primarily attributed to the DDEP, the Bank of Ghana has faced allegations of authorizing costly expenditures without obtaining parliamentary approval.

For example, the central bank has come under heavy criticism for approving payments for the construction of a new corporate headquarters in Accra which is estimated to cost more than $121 million. In its response, BoG confirmed that after evaluating tenders that were received, “the Entity Tender Committee (ETC) of the Bank at its meeting held on 6th August 2020 considered Tender Evaluation Panel’s recommendation and approved the award of contract for the project to Messrs Goldkey Properties Limited at the cost of $121,078,517.94”.

It further stated that this was “the least cost evaluated bid, under Turnkey (Design and Build) contract arrangements.

” Bank of Ghana has explained that the decision to commence construction of a new headquarters building in Accra to replace the old one was taken in 2019 when the Bank generated profits and that appropriations for the Head Office were made each year from profits in 2019, 2020, and 2021. “The project has, therefore, been going on for over 3 years,” Bank of Ghana governor, Dr. Ernest Addison emphasized.

The Minority in Parliament gave the Governor twenty-one days to resign – this ultimatum has expired. According to the minority, the Governor has supervised reckless spending of government and has contributed to the high inflation rate which remains above 40% for the month of August 2023.

The minority also believes the Central Bank has also engaged in ostentatious expenditure in 2021 and 2022 compelling to record such a colossal loss. For instance, they stated that foreign and domestic travels of the Bank of Ghana cost the Ghanaian taxpayer a staggering GHS97.4 million, which is about a 246% increase over the previous year; the Bank of Ghana also dissipated another GHS8.6 million on Director’s remuneration alone.

This represents about an 87% increase over the previous year’s expenditure plus the decision to invest $250 million in the construction of a new head office in Accra.

Finance Minister, Ken Ofori-Atta however believes the central bank remains prudent, strong and is functioning efficiently.

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