The International Monetary Fund (IMF), citing Ghana’s failure to meet its loan requirements, has expressed alarm over the Chinese government potentially acquiring access to the country’s mineral and electricity revenues.
IMF officials were quoted by myjoyonline.com as saying that Ghana may not be able to pay back four loans it took out from China and had secured with the sale of its energy and mineral resources.
Ghana has at least eight loans from China over the past ten years, with a variety of mineral resources used as collateral to lower the risk of default. Out of the $1.9 billion in loan agreements between Ghana and China as of the end of 2022, the collateralized loans represented $619 million.
The $619 million in loans, according to the IMF, were obtained between 2007 and 2018 and were backed by Ghana’s earnings from cocoa, bauxite, oil, and electricity.
In the words of the IMF, “Collateralized debt is any contracted or guaranteed debt that gives the creditor the rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt.”
The IMF emphasized that statutory funds shouldn’t be used to guarantee revenue streams or issue debt in order to address this problem. It strongly stated that the governing authority would not issue no objection certificates to any statutory fund for such uses.
The possible repercussions of Ghana breaking its credit agreement are worrisome. The country’s economic sovereignty and control over its vital resources would be significantly impacted by giving the Chinese government access to Ghana’s mineral and electricity revenues.
To protect its economic stability and independence, Ghana must act right away to improve its financial status and look into other options for meeting its loan obligations.
It serves as a reminder that, in order to avoid potential hazards to a country’s economic independence, collateralizing important national resources should be approached with caution.