Government has to seek an additional GH¢1.2 billion to be able to pay off all debts owed Bulk Oil Distribution Companies (BDCs) which, currently, is over GH¢2.2billion (GH¢2,263,610,424).
This is because the amount of money officially set aside by government to pay off the debt, has turned out to be lower than the amount arrived at after the conclusion of an audit into BDCs debt.
Govt set aside GH¢800m for BDCs debt
The government in a letter to the International Monetary Fund (IMF), said it had provisioned GH¢800million for the repayment of arrears that were identified through the audit of the additional claims by oil importers related to losses due to under pricing and foreign exchanges losses in 2014 and early 2015.
According to the letter, the first repayment to oil importers was planned for October.
Banking sources told The Finder that government paid GH¢124million out of the amount last Wednesday.
As to when government intends to clear all the debt is not clearly known since the letter to IMF fell short of specifying a time frame to pay all the debts owed BDCs.
But figures seen by The Finder reveal that the total debt government owes BDCs is over GH¢2.2billion (GH¢2,263,610,424).
Audit found GH¢1.53b debt
An audit into the debts owed BDCs arrived at over $384million ($383, 902, 606) as the amount government has to pay 17 BDCs in foreign exchange under-recoveries.
At an exchange rate of GH¢4 to one dollar, the Cedi equivalent of $384million ($383, 902, 606) will be GH¢1.53billion (GH¢1, 535, 610, 424).
GH¢160m yet to be audited
The audit also noted that some $40million was not included in this audit and should also be audited to conclude all foreign exchange under-recoveries owed BDCs.
At an exchange rate of GH¢4 to one dollar, the Cedi equivalent of $40million is GH¢160million.
The explanation is that out of $55.96m claimed by the BDCs, which related to transaction established in the year 2013, it was noted that 72% of the amount was not included in the submission by the BDC’s in the audit carried out in 2015 which scope included 2013 transactions.
The audit was conducted by international accounting firm, Ernst and Young, with assistance from officials from the Bank of Ghana (BoG), Ministry of Finance, National Petroleum Authority (NPA), BDCs and banks holding the debts.
GH¢68m debt outstanding since 2013
Checks by The Finder also found that an additional outstanding audited debt of $17million for losses incurred in 2013 is also pending.
At an exchange rate of GH¢4 to one dollar, the cedi equivalent of $17million is GH¢68million.
GH¢500m RVF debt outstanding
Aside the $383million debt, interest on price under-recoveries debt also known in the industry as Real Value Factor (RVF), is close to GH¢500million.
This is calculated by the National Petroleum Authority (NPA).
The foreign exchange losses were incurred as a result of depreciation of the Cedi from June 2011 to December 2015, which government did not pass on to the consumer and, therefore, has to pay it to the BDCs.
Majority of the BDCs contracted loans from commercial banks in the country to facilitate their operations but have failed to pay up the loans due to government’s indebtedness.
The development has been attributed as one of the causes of the significant rise of bad loans on the books of banks recently.
Ghana’s letter to IMF
The Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding Ghana was sent to the International Monetary Fund (IMF) in September 2016, requesting the IMF Executive Board to complete the third review of Ghana’s Extended Credit Facility (ECF) arrangement and approve the disbursement of the fourth tranche of the loan based on the satisfactory implementation of performance criteria (PC).
The 51-page letter, dated September 16, 2016, was addressed to Ms. Christine Lagarde, Managing Director of the IMF.The letter was jointly signed by Finance and Economic Planning Minister, Seth Emmanuel Terkper and Governor of Bank of Ghana, Dr Abdul-Nashiru Issahaku.
The BoG pledged to develop a settlement mechanism to address the stock of matured letters of credit (LCs) to oil importers which was outstanding as at May 2015, following an audit to determine which LCs are eligible for such resolution.
Source: The Finder
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