General News of Wednesday, 6 August 2014
The $300 million loan facility approved by Parliament for the Ghana Armed Forces (GAF) is in limbo following sweeping economic sanctions placed on Russia by the European Union (UN) and the United States for their involvement in the Ukraine crisis.
Parliament after much opposition from the Minority in Parliament approved the $300 million loan facility being sourced from Russian bank, VTB Bank.
However, due to the conflict situation in eastern Ukraine, which is believed to be supported by Russia, EU governments have imposed sanctions on Russia, targeted at state-owned banks.
President Barack Obama joined the EU by cutting off three large banks, VTB Bank, Bank of Moscow and the Russian Agricultural Bank from the US economy.
This means that VTB Bank will in the interim be unable to fulfill its part of the deal by releasing the money to Ghana.
The loan will be used to secure arms for the nation’s security personnel who are on peacekeeping duties in Mali and Sudan.
The Minority vehemently opposed the approval of the loan, stating concerns ranging from due diligence, value for money and the position of the Attorney General regarding the loan among others.
A member of the finance committee of Parliament, Dr. Mark Osei Asibey Yeboah on Citi Fm's Eyewitness News disclosed that because Ghana has never had any dealing with VTB Bank; the Russian bank expected to pay the loan facility.
“When we asked for a due diligence report from the Bank of Ghana, it was inconclusive. The Bank of Ghana said they couldn’t vouch for the ability of VTB to fully conclude this deal,” he said.
The Member of Parliament (MP) for New Juabeng South said he feared Ghana’s involvement with Russia will have both political and financial risks.
He asked, “will they be able to fully conclude this deal?”
President John Mahama is in the US to sign an agreement between Ghana and the US government’s Millennium Challenge Corporation (MCC) for the release of 498 million dollars of the second compact of the Millennium Challenge Corporate.
Dr. Asibey Yeboah however believes if US discovers Ghana’s involvement with a state-owned bank in Russia on which there are sanctions, “there could be implications for us [Ghana].”
He stated that the $498 million will be released in tranches “so in the coming months, if the US sees that we are going ahead with such an agreement, will they hold on to some of these monies?”
According to him, the VTB Bank was not going to be able to pay the full amount agreed on and with the current sanctions, the bank could be cash-strapped therefore, in the coming months, it will be revealed whether the loan agreement will still hold or be aborted.
“If they don’t have the funds, certainly they cannot disburse…they were part lenders, and other lenders were going to give us the rest so now that they have faced some challenges… I will not be surprised if they write to Ministry and government that they are pulling out,” he remarked.