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17.07.2002 Feature Article

The Government Should Thread Cautiously With The IFC Loan

The Government Should Thread Cautiously With The IFC Loan
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Ken: Ron, Could you help me, please? Do you know of an Organization by the name of INTERNATIONAL FINANCE CONSORTIUM (IFC)? Thanks, Ron: Dear Ken, You might mean the International Finance Corporation (IFC) at I did an extensive and thorough search for International Finance Consortium and couldn't come up with anything. Granted, it does sound familiar. It sounds like something one of our member's would use. If I turn up with anything I will let you know. Where did you come across that name? Ken: Thanks Ron, I mean International Finance Consortium. I know International Finance Corporation of the World Bank Group. I asked because there is a big controversy brewing in Ghana's Parliament about a loan of $1billion at 2.5% for a term of 25 years being extended to Ghana by an International Finance Consortium (IFC) with similar acronym to World Bank's IFC. The Opposition is charging that it is fraudulent and that International Finance Consortium does not exist. The problem is a Commitment Fee of some $12.5 million that is to be escrowed. The commission will be 3.5% or $35 million. Parliament is debating as to whether to approve the terms of the Loan Agreement. And then suddenly some one sounded an alarm that the group might be a fake and that they deliberately chose the IFC acronym to deceive the Government of Ghana. Ron: Dear Ken, I don't know of anyone that would lend at 2.5%. Would you? I don't think so...The only way to check someone out is to ask them directly for VERIFIABLE proof that they are who they say they are and that they have done this before, successfully. Everything else is just so much conversation. For $35M I would offer a rate of 1% for 50 years. Then, as soon as I got the $12.5M I would get on the first plane to another planet. I find it impossible to believe that your government would even entertain listening to such nonsense. Basically it's called "tell them what they want to hear then take the front fees and run..." The reason you can't find IFC is because it's a ghost operation. Legitimate lenders will offer financial statements to show how financially sound and stable they are. To me, it sounds like whoever is behind IFC doesn't have enough money for his next meal. Or, if they are very "showy" it's just a front to appear successful until they get their hand on your government’s money. I find it hard to believe that this is actually being taken seriously. All the best, Ron “ The above are the contents of unedited conversation that took place between Ronald Gershen and me, recently, by email. Ronald Gershen is the Chairman of the Board of Directors of The International Society of Financiers. The International Society of Financiers was founded in 1979. Its membership includes a variety of lenders and loan brokers across the World. I happen to be a member of this Organization in good standing Naturally concerned about the nature of the discussions brewing in Ghana on the above topic and having searched extensively but fruitlessly myself to find the identity of International Finance Consortium, I reasoned that if any one would know about The International Finance Consortium, Ron would be the one. But, it appears he doesn’t know either. Please, don’t get me wrong. The fact that the Chairman of the Board of Directors of The International Society of Financiers does not know of International Finance Consortium does not necessarily mean that the organization does not exist. In the first place, not all lenders or brokers belong to ISF. There are several legitimate and credible lenders who are not members of ISF. This is why I only advocate caution but not outright abrogation of what could possibly be a sweet deal for Ghana. As I have always said, I have no doubt in my mind that the NPP Government has good intentions towards our dear country. I don’t think that the Minister of Finance, The Governor of Bank of Ghana and The President of Ghana would knowingly get Ghana involved in what the NDC describes as a scam or 419. Not in the knowledge of what they themselves are doing to people in the previous Government who have been found to be involved in similar dubious deals against the State. It would amount to political suicide, to say the least. This is why, even though I am disturbed by the comments of my colleague, Ronald Gershen, I still find it hard to believe that International Finance Consortium could be a ghost organization. Let us give the Government the benefit of the doubt. Why $1billion and why a Private Lender? These are legitimate questions that any well- meaning Ghanaian may ask. Again, I would like to postulate a defence, knowing very well that I don’t have all the facts. In fact, the Government itself is in a better position to answer these questions and I hope they do, soon, for their own sake. Ghana needs massive funds if the Government would hope to make any meaningful headway in lowering the level of poverty in the country. All the sectors of the economy require massive infusion of hard currency. We need money to fund The Government’s Private Sector initiatives, the President’s Cassava Project. We need funds to build roads that will last, instead feeder roads that are washed away by the first rains as we have seen time and again. In order to take advantage of the United States’ African Growth and Opportunity Act (AGOA), the nation needs to make massive capital available to the private sector operatives who have the knowledge and capacity to produce the goods that can be exported to the massive US market. All of these have to be done in the shortest possible time if we want the economy to move forward soon. Our traditional lenders, the IMF and World Bank Group, tend to lend us “sopi sopi funds.” I have argued before that a huge one-time loan will have a more beneficial impact on the nation’s economy than a series of small loans. If you were to analyze the $6billion that the country owes, you would find that those funds were extended to us over a long period of time in small doves of about $150 -$200 Million per year if that much. When such small funds are allocated to the various sectors of the economy, you find that each sector receives peanuts – funds that are not enough to do any meaningful project(s). If you add the impact of waste-conduits in the economy – corruption, inefficiency, laziness and indecision – over the long haul, you have accumulated a massive debt and yet you have nothing to show for it. I am sure the NPP Government is aware of this and this is the reason that may have motivated them to seek funds in the $1bilion range. But, from where do we get $1billion? Our traditional lenders won’t make such a facility available to us. They never have. The World Bank Group doesn’t have an infinite source of funds. Ghana is in competition with several other countries for funding from these traditional lenders. This leaves us no choice than to seek other sources of funding. And this, I suspect, is the reason why the NPP Government found the offer from International Finance Consortium such an attractive one. If, in fact, the International Finance Consortium is genuine, and the Government can pull this off, they will come out as heroes. However, if as Ronald Gershen thinks and the NDC believes is the truth – that is, IFC were a fake, then I am afraid, the hopes of the NPP Government would be on the rocks and those of mother Ghana with it. And this is why I urge caution.

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