'Chinese loans are immediate but risky; short repayment period, high interest rate, ties Ghana to Chinese contractors' — ACEP

The Africa Centre for Energy Policy (ACEP) has advised the government to prioritize long-term economic benefits when negotiating loan agreements with China and other bilateral partners rather than short-term political gains.

Mohammed Saani Osman, a Policy Analyst at ACEP, made the call during a media training session in Accra on Wednesday, March 12.

According to Mr. Osman, the government's approach to borrowing frequently favors immediate access to funds for political reasons above rigorous consideration of the long-term ramifications of these arrangements.

“You see that politicians want to go to sources with a high-risk appetite because of how quickly they can get the money to fund projects. They forget that these agreements have long-term impacts on debt sustainability,” he said.

He explained that Chinese loans have rigid conditions, such as high interest rates, shorter repayment periods, and clauses tying Ghana to Chinese contractors and suppliers in infrastructure development.

“The repayment periods are short, the interest rates are high, and yet governments still prefer them because they provide immediate funding for infrastructure projects. But in the long run, this puts the country in an unsustainable debt position,” he added.

Without a change in approach, Mr. Osman cautioned, Ghana runs the risk of experiencing repeated debt problems which may result in seeking bailouts from organizations like the International Monetary Fund (IMF).

“We need to move beyond short-term political considerations and assess the real cost of these loans. The government must prioritize financing options that support long-term economic growth and sustainability,” he stressed.

He also urged civic society and the media to scrutinize government borrowing decisions and promote responsible lending practices.

The session focused on China's lending strategy and its implications for Ghana's debt sustainability.