One consortium and five investment and universal banks have been shortlisted as likely arrangers of a GHS2.3 billion loan for the Ghana Education Trust Fund (GETFund).
The six banks are looking for an opportunity to raise the total amount or part of it for the GETFund under a financing arrangement that will see between 30 percent and 40 percent of the fund’s allocations escrowed for repayment.
The six were part of 11 set of financial institutions that submitted initial expression of interest (IEoI) to a financing team currently searching for funds for the GETFund, a public trust in charge of supplementing government’s efforts in the provision of educational infrastructure in the country.
They include; the Barclays Consortium, Societe Generale, Forms Capital, Amprofi Group and CAL Bank.
One person familiar with the transaction said initial assessment of the various proposals indicated that the interested banks may lack adequate capacity to fully deliver what was needed on individual basis.
The arrangement around GETFund’s search for funds is similar to the one done for the Energy Sector Levy Act (ESLA), where a portion of ESLA collections is securitised for a loan used to refinance the energy debt.
As is the case with the ESLA arrangement, the GETFund loan will not receive sovereign guarantee but will be collateralised against the fund’s collections.
In the 2018 Mid-Year Budget Review presented to Parliament on July 19, government decoupled the 2.5 percent each of GETFund and National Health Insurance levies from the Value Added Tax (VAT) into separate taxes called Education and Health taxes.
An Investment Banker with DATABANK, Mr Courage Kwesi Boti, told reporters that the decision was to help prepare the grounds for GETFund’s maiden foray into the market in search of funds.
“Making it a specific tax means that consumers and sellers do not have the right to claim input tax again since it has now become a fixed tax.
“This increases the volume of money you could get from there. Also, it is now isolated and a dedicated fund that can be securitized to raise the GHS2.3 billion that they are looking for,” he said.
As a result, he said the idea was “futuristic” and a bold decision meant to address infrastructure challenges facing the country.
He stated further that the guaranteed nature of the GETFund allocations – from the newly constituted Education Tax – means that repayment for the loan will also be guaranteed.
Mr Boti, however, called for measures to ensure that collections into the Education Tax account will not be diverted but will be used for the intended purpose.
“Once there is a dedicated cash flow for that debt that will be raised and then there is enough provision to ensure that that money will not be diverted into other sectors but to service the debt, we could reasonably project a growth in consumption expenditure and the related VAT that will come out of that.
“So, it does not put the transaction under any significant risk,” he explained.