The Difficulties In Acessing The $3 Billion Loan For Development—Can We Renegotiate It With China?

We might find it difficult to access the $3billion loan from China for the much needed infrastructural development project in Ghana. This is what Mr. Anthony Akoto Osei former Minister of Finance once said when Ghana signed the pact with the Republic of China for the loan. Perhaps in studying the agreement he got to know what many people in Ghana did not know.

The Chinese were in for business with Ghana and therefore would want to pursue a deal that would be beneficial to them. He saw clauses in the agreement that might be problematic to us. For inexplicable reasons his words might have been ignored. That should not be the case .We must always bend backwards to seek help from experienced hands in and outside parliament like Dr Akoto Osei and others like him once served as Ministers.

A few months down the line Dr Akoto Osei seems to be vindicated when the president cried out to the Chinese leadership to expedite action to allow the $3bn loan to flow as expected to Ghana for various development projects. To be able to benefit from the loan the former finance minister is advising the government to go back to renegotiate the agreement on the loan with the Chinese leaders. The reason is simple Ghana has been forced to pay more counterpart funds and penalties on the loan for no good returns. For this reason Ghana's ailing economy that requires to fix education, health and agriculture issues seems to be bleeding. We are not only required to pay more for the loan, we are really paying hard cash to the Chinese for various reasons under the loans agreement.

To stop the financial bleeding, the president, he said, should seek a total cancellation of the commitment fee attached to the loan and also seek a cutback on the “complicated” disbursement mechanism.

“I think the commitment fee should be completely cancelled,” Dr. Akoto Osei said. “It is not typical for commercial loans. They need to also renegotiate the conditions for disbursement.

For example, if you go to the capital market to raise money, as soon as the transaction is completed, within two days the money is available. In this case it has not come. The conditions for disbursement are too complicated. They need to renegotiate it, otherwise we are in trouble.”

He also worried that government's capital expenditure plans for 2014 will be derailed if the loan's disbursement mechanism is not reviewed.

“If you look at our domestic expenditure, over US$4billion or so is foreign-financed, and the majority is coming from the Chinese loan. So if it does not come, those investments will not happen,” the Minority MP for Tafo in the Ashanti Region told the B&FT.

“And if you look at the experience for the past two years, only US$600million has come and Ghana is expecting about US$1.6billion to come from the Chinese loan this year. Any delay means that all those projects cannot materialise. It does not help us,” he added.

Only “a head-of-state to head-of-state negotiation”, he believes, is the way out for the country.

A Deputy Minister of Finance, Kweku Ricketts-Hagan, however told the B&FT that much as things could have been better with the benefit of hindsight, “the negotiators [of the CDB loan] did the best they could at the time”, and that the country will have to honour its side of the bargain.

“ I agree that we needs to expedite the loan, but I don't think renegotiating the agreement is what needs to happen. What we need to do is tie-off the necessary loose-ends. It is part of the reason the Chinese Foreign Minister was here last week, and he met with the President and the Minister of Finance on the issue,” the Deputy Minister said.

“It's true that having signed the agreement a couple of years ago, we would expect that by now we should have drawn down a significant amount. But after the main agreement, there were some consequential agreements that had to be signed.

We have to understand that the projects also require project preparation before we can draw down the facility. If you don't undertake the project preparation,you can't drawn down the loan," he added.

The country is said to have paid some US$54million already as commitment fee when only US$600million of the US$3billion loan has been secured since the agreement was signed in 2011.

Delays in releasing a US $75million component of the project in the Western region has forced contractors to postpone the date of completion a number of times.

The situation forced President Mahama to ask the Finance minister a couple of months back to explore other sources of funding for the gas project, which is needed to boost gas supply to the power sector.

We need the loan badly for all the infrastructural development including our gas projects in the Western Region, some major roads and many more. However we need to take care of the bottlenecks to accessing the loans. The time to act on this by government and the opposition and everyone concerned is now.

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