Re: Whereabouts of gold reserves – Why won’t Bank of Ghana publish its 2007 annual report?

More than a week ago an investigative article here on GhanaWeb humbly raised the question of the whereabouts of Ghana’s 8.7 tonnes of official gold reserves after two independent international organizations - the World Gold Council and the IMF – published reports that raised doubts about the whereabouts of the national assets. Since 1960, the World Gold Council (using IMF data) has ALWAYS reported Ghana’s gold reserves, and as late as March 2007 the international body reported that Ghana held 8.7 tones of Gold in its national vaults. However in the latest September 2008 report – Ghana’s gold reserves is now no where to be found. (See attached WGC global 2006 report vs. WGC global 2008 report).

Also skeptics can see total global listing on http://en.wikipedia.org/wiki/Official_gold_reserves

o Despite raising such a serious question on GhanaWeb – simply Ghana’s largest Diaspora web portal – no one in our government or many diplomatic missions has seen fit to come out with the appropriate documents to assure us – the ordinary citizens of the land and in whose name the gold reserves are being held – what the true story is. The SILENCE HAS BEEN DEAFENING, leading many to construe the silence as an admission by the authorities that the WGC report is worryingly true.

o However earlier this week a local newspaper THE CITY & BUSINESS GUIDE with apparently strong links to the government published a rebuttal here on GhanaWeb after talking to “sources within the Bank of Ghana” seeking to reassure ordinary citizens not worry because the official gold reserves kept at the central bank to back-up our currency has now vanished into SOIL (Mother Earth) waiting for Newmont and Anglo Gold Ashanti to mine it. Wow!! Nice journalist job CITY & BUSINESS GUIDE – see link to their story

http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=150974

o All these questions may seem academic, but recent reports of a 14% slide of the Ghanaian cedi against the US dollar affects the ordinary businessman who is importing food and other goods into Ghana – and consequently affect the ordinary person on the streets who buys the imported shoes, second-hand clothing or chofi meat at a higher price than would otherwise be the case. So any official actions which cause our currency to lose value is a very very pertinent issue for all of us Ghanaian – regardless of party and not something trivial. Also with our many dollar borrowings – the $850mn Eurobond plus the recent $300mn loan from JP Morgan Chase/ renaissance capital to pay off Ghana Telecom’s debt – EVERY TIME the cedi depreciates, the value of those loans go up. So already on top of the more than 1.2 billion dollars that Ghana will pay back on the Eurobond in 9 years, the actual value of than Eurobond is now 14% more (a WHOPPING $119 million more) – just on a 14% slide in the currency in one year.

o Ironically the Bank of Ghana can clear up all this growing doubts by SIMPLY complying with the Bank of Ghana Act 2002 and PUBLISHING their 2007 annual report – so that all Ghanaians can know what’s going on with the gold reserves. Its strange that as of October 3, 2008 – a WHOLE 10 MONTHS after the end of the 2007 financial year – the Bank of Ghana has NOT published its 2007 annual report … see BOG’s website http://www.bog.gov.gh/index1.php?linkid=157 The audited annual report will show whether there have been any changes in the gold assets of the Bank. So why is the Bank of Ghana hiding and not publishing its audited annual report? Why has it refused to submit this data to the IMF? Is there something in the 2007 reports that is being hidden? Or should we believe the World Gold Council report that the gold reserves are simply gone??

o These are not just mere speculative questions - the law governing the operations of the Bank of Ghana (BOG Act 2002) specifically requires the Bank to gazette and publish such information within 3 MONTHS of THE END OF THE CALENDAR YEAR. ITS NOW OCTOBER 2008 – almost 2009 – and yet we still don’t have the 2007 annual report published (See attached Bank of Ghana law and relevant provisions discussed bellow)

Relevant sections of Bank of Ghana Act 2002 ….

o Article 4 (I) j of the Bank of Ghana Act 2002 commands it to “promote and maintain relations with international banking and financial institutions ….” This admonition notwithstanding as of October 2008 the IMF and the World Gold Council have still not received Ghana’s normal annual data on its gold reserves since mid 2007. (See attachments from internal IMF reports on Ghana’s lack of reserves)

Section 7. (1) says “Profits or losses arising from a revaluation of the Bank's liabilities in gold, special drawing rights or foreign securities change in the par value of the cedi or of any change in the P currency unit of any other country shall be excluded from the annual profits or losses of the Bank.

o How can the government (the only shareholder of the BOG as trustee of the people of Ghana) know what the annual profit and loss of the Bank unless it can know how much gold and other assets and liabilities are on the balance sheet of the bank?? And if this information is known internally – why has the government/ BOG kept it from the IMF and the public as required by the Bank of Ghana Act? What’s so embarrassing about the report?

Section 14. (1) The Governor shall summon meetings of the Board as often as may be required but not less frequently than once in each month.

o So if the BOG is having at least monthly Board meetings, why haven’t the Board ordered that the 2007 annual reports be published as commanded by law? Or have they asked the government to do so – and it has refused? Why are both the BOG and Ministry of Finance sitting on the 2007 annual report a whole 10 months after the end of the calendar year??

Section 58. (1) The Bank shall, within three months after the end of each financial year,(a) transmit a copy of the annual accounts certified by the Auditor-General to the Minister who shall, not later than one month after receipt of the annual accounts, cause the annual accounts to be published in the Gazette; and (b) submit to the Minister an annual report of the Board on its working during the financial year in question which shall be published by the Bank within six months from the end of the financial year to which it relates.

(2) The Minister shall, not later than one month after receiving the annual report, submit the annual report with the Minister's comments on it to Parliament.

(3) The Bank shall, after the fifteenth day and the last day of each month, prepare and publish returns of its assets and liabilities as at the close of business on those days; or if either of those days is a holiday, then at the close of business on the last preceding business day; and a copy of the returns, shall be transmitted to the Minister and shall be published in the Gazette by the Bank within one month after receipt of the returns by the Minister.

o Since the audited annual report of the Bank of Ghana is supposed to be presented to the public at least six months after the financial year of government per Section 60 of the BOG Act 2002 (“The financial year of the Bank shall be the same as the financial year of the Government”) – the question arises as to when Ghana’s financial year end?? According to the Ministry of Finance – Ghana follows the normal calendar year that begins January 1 and ends December 31. (See http://www.mofep.gov.gh/documents/2008_b_s.pdf) So clearly the Bank of Ghana and government are in error if by October 2008, any normal Ghanaian citizen can not go to the Bank of Ghana website and access the 2007 annual report – a WHOLE 10 MONTHS after the end of 2007 and two months away from the beginning of 2009!

Section 22. (1) The Bank shall have a Chief Internal Auditor who shall be appointed by the Board. (3) The Chief Internal Auditor shall, as part of the functions of office, at intervals of three months, prepare a report on the internal audit work carried out by the Chief Internal Auditor during the period of three months immediately preceding the preparation of the report, and submit the report to 12 the Governor who shall place the report before the Board.

o Cleary if the Bank of Ghana’s internal auditor is doing his or her job and reporting every three months to the Board – then why will it be that in October 2008 neither we the ordinary citizens of Ghana nor reputable international organizations such as the IMF/ World Gold Council can easily ascertain what the official gold reserves of Ghana are? Either the internal auditor is doing his/her job and his/her reports are not being published – or he/ she may not be doing his or her job? Or the government has the report and is refusing to publish it? – all of this in contravention of law.

Section 28. The Bank shall be the sole custodian of the state funds both in and outside Ghana, and may by notice published in the Gazette authorize another person or institution to act as custodian of any such funds as may be specified in the notice.

Section 29. (1) The Bank shall receive, collect, pay and remit money, bullion and securities on behalf of the Government. (2) The Bank shall accept custody of all securities, documents and other valuable objects belonging to the Government.

o Again clearly Section 28 of the Bank of Ghana Act says that the Bank of Ghana shall be the “SOLE” custodian of ALL state funds in and outside Ghana. Some GhanaWeb readers have wondered whether the government loaned out the gold to a foreign bank?? If it did so it should have publicly published the action by Gazette and specified which foreign bank it was and for what reason. So again if the gold is not there and the IMF and World Gold Council do not have the data – then the Bank of Ghana should come forward and address the questions set forth.

Section 32. The Bank shall advise Government on (a) the monetary transactions of the Government and government agencies; and (b) the international and local contracts to which the Government is a party and which relate to the object and functions of the Bank.

o The BOG is mandated to advice the government on all monetary transactions – so we await it’s official word on where our national gold reserves are? Loaning or selling the gold reserves to expand credit to the government would have inflated the monetary base – so if this is what the BOG did, it should simply come clean and explain it to Ghanaians as the government couldn’t have done that act without its help and advise per Section 32 of the BOG Act 2002.

Section 36. The Bank shall hold assets to cover the currency notes and coins issued by the Bank.

o For those of our brothers and sisters on GhanaWeb who doubt the critical importance of the gold reserves to backing up the value of the Cedi, here you have it. “THE BANK SHALL HOLD ASSETS TO COVER THE CURRENCY AND COINS ISSUED BY THE BANK.” The gold reserves constitute an essentially critical part of those BOG assets – it is the ONLY asset in the world that has not lost value in 10,000 years – and that is why every central bank holds it jealously as an asset. And without knowing where the gold reserves are, the value of our cedi is up in the air so to speak – being open to dangerous international speculation and subject to the wild fluctuations of our local economy. And again without publishing the 2007 Annual report of the bank – WHOLE 10 months into 2008 – how can any Ghanaian or foreign investor really know what the assets of the Bank of Ghana are? And therefore what the ultimate value of our currency should be? Its almost 2009 – and yet the 2007 annual report is still under wraps !! Eii amanfour - how do we expect to generate foreign investor confidence with this kind of behavior?

o The BOG like all central banks around the world may from time to time under the direction of the Board slightly increase or decrease its gold reserves. What almost no central bank (except Zimbabwe and a few other bankrupt countries have done) is to TATALLY LIQUIDATE the ENTIRE reserves. Since 1960 the BOG has almost doubled the country’s gold reserves – from 5 tonnes in 1960 to 8.7 tonnes in 2006/ early 2007. Accordingly Section 51 (1) d allows the BOG to “import, export, refine, hold, sell, transfer or otherwise deal in gold, gold coins and bullion, silver, platinum and any other precious metals as determined by the Board.” If the BOG has liquidated the gold reserves it should simply state so and explain why it had to do so – the 1st time in our nation’s history!

o Some suggest that the BOG might have lent out our national reserves to some international bank in exchange for a loan. However if this is so, that power is not unlimited. It can only do so only for 90 days at a time. Any such agreement lasting longer than 90 days is apparently illegal under Section 51. So if the BOG has not sold but rather lent out the country’s ENTIRE gold reserves as collateral against loans they have made to the government – they should kindly come out let us know as required by law. The BOG shouldn’t hide behind the unpublished 2007 annual report to hide the true state of our country’s finances from ordinary Ghanaians and ordinary investors.

Section 51. (1) The Bank may, (a) without the prior approval of the Minister borrow money from foreign institutions for a period not exceeding ninety days for the day-to-day operations of the Bank; (b) in accordance with this Act or any other enactment, borrow money from foreign institutions and pledge assets held by it as security for the repayment of the loan; (c) lend money or grant short-term credits to

o It is already October 2008 and the Bank of Ghana – has still NOT PUBLISHED its 2007 annual report. This will seem to be in contravention of Section 55( c )of the Bank of Ghana Act 2002 which commands the BOG to “(c) prepare and publish the annual report of the Bank which shall include statements about monetary policies pursued in the year under review.” So then why hasn’t the Bank of Ghana published its annual report?? Is it violating Section 58 of the Bank of Ghana Act?? The BOG should have submitted its annual report to the Minister of Finance by April 1, 2008 (three months after the official end of the year). And the Minister should have published the submitted the report to parliament by June 1, 2008 and by July 1 2008 the annual report for the Bank of Ghana should have been published in the public Gazette and quickly released on the website of the Bank of Ghana for all international and domestic investors and researchers to see.

o Also in line with Section 4 (i)j, the Bank should have by now (October 2008) informed all the relevant international agencies such as the IMF (and by implication the World Gold Council) of its total assets (including gold) and liabilities (including any loans secured using the country’s gold reserves as collateral so as to assure international investors that Ghana’s currency is safe and no speculative attacks on it will be warranted. Without doing this we open ourselves up during this period of international financial turmoil to a speculative attack.

The LONG & SHORT of this story that the Bank of Ghana must simply publish its long overdue 2007 annual audited reports to put all our anxieties and speculations to rest. It should then also inform the relevant international agencies such as the IMF and the World Gold Council. Citizens shouldn’t have to beg their democratic government to conform to the law and publish normal annual reports on national assets acquired by the toil and sweet of citizens thru the generations. The BOG under the military regimes of the 1960’s, 1970’s and 1980’s regularly supplied this information to the IMF without fail – a democratic regime can surely do better. How can the BOG demand that private commercial banks in Ghana to publish their annual report, and fine them if they do not and YET a whole 10 months after the end of the 2007 calendar year, and two months away from 2009, we ordinary Ghanaians, the ultimate shareholders in the Bank of Ghana through our democratic system have to beg the government and BOG to conform to its own law.

As patriotic Ghanaians, whether we belong to or sympathize with the NDC, NPP or CPP or to no party at all – lets continue to DEMAND ANSWERS and ensure that our children don’t inherit a Ghana worse off than we did!!

By: K.S. Garbrah

SUPPORTING DOCUMENTS:

1. See Bank of Ghana Law attached

2. See IMF Document showing no gold reserves since mid 2007

3. See World Gold Council global foreign exchange reserves by ALL countries in 2006 and 2008 – look for Ghana on the list in 2008…