Finance Minister, Seth Terkper, has given indication he will soon present to the Legislature, a request to reduce the $3 billion China Development Bank (CDB) loan to half.
The loan agreement was signed by Ghana and CDB in 2011, after the International Monetary Fund (IMF) increased the country’s commercial borrowing ceiling from $800 million to $3.4 billion in the same year.
The Master Facility Agreement (MFA) was aimed at financing projects such as the Takoradi-Kumasi Western Corridor Infrastructure project, the Sekondi Free Zone project, the ICT enhanced surveillance project for the western corridor oil and gas enclave project, among others.
Presenting his mid-year budget review to Parliament on Wednesday July 16, Mr Terkper announced that ‘CDB has introduced a new condition precedent to the effectiveness of the subsidiary agreements of the two additional projects, namely a side agreement to amend some of the terms of the MFA as well as the five-party agreement and account agreement.’
The five-party agreement between government, Bank of Ghana (BoG), Ghana National Petroleum Corporation (GNPC), CDB & UNIPEC Asia, and the Ministry of Finance and Economic Planning (MoFEP) sets out the structure and key contractual obligations of each party under the transaction.
Government under the agreement is obligated to open and maintain the transaction accounts, BoG to ensure timely and legal transfers of repayments to CDB accounts and to open and maintain standby letters of credit; GNPC to supply and UNIPEC’s to purchase crude oil to support repayments and MoFEP to oversee and manage the loan and the projects.
UNIPEC is a petrochemical subsidiary of Chinese-owned SINOPEC.
The Accounts Agreement set up the activities such as collection, debt servicing among other transactions.
‘Based on the advice from the Ministry of Finance and the Attorney General’s Department, Cabinet in June 2014, approved the government of Ghana’s capping of the facility at 1.5 billion U.S dollars and it has also recommended that the side agreements in their suitable forms should be brought to the House for consideration’, he told the Parliament.
The side agreements are signed between government and CDB to cover the funding for each project proposed for financing.
‘What this means is that government and this house [Parliament] will be called upon to take advantage of the provisions under the MFA to amend it in order that the loan facility would be reduced from $3bn to $1.5 billion’, the Finance Minister said.
The minister revealed that as at June 2014, two out of four projects under the agreement have been signed and are being financed by the facility.
‘These are the Western Corridor Gas infrastructure project ($800 million) and the ICT enhanced surveillance project for the western corridor oil and gas enclave project amounting to 150 million dollars’, adding the facility was to be disbursed under two trunches , A and B, of 1.5 million dollars each.
‘Both projects[western corridor gas infrastructure project and surveillance project] are trunch B facilities hence the status of the facility to date is that in the trunch A there has been no activity and the trunch B which is 1.5 billion, the total amount disbursed is 597.3 million, total amount disbursed in 2014 is 20.8 million dollars and the total number of projects underway are two’, he explained.
According to the Minister, the total amount of additional projects that CDB has agreed to sign are the coastal fishing and landing sites, and the Accra Metropolitan Assembly Intelligent traffic light management.
The CDB loan has been a source of concern for some economists after delays by China to release funds for the earmarked projects.
The Minority has for instance asked government to pull the plugs on the loan facility since the terms of the loan were not in favour of the country.
They made the call at a press conference on the state of the economy after the Senchi forum last month.
Also, think tank, IMANI Ghana has doubted government’s ability to satisfy the credit requirements on the loan in the short-term. IMANI had predicted that “the maximum facility available to Ghana shall not exceed $1 billion over the timeframe of 2012 -2013. And even this $1 billion shall not come on a silver platter.” Story by Ghana | Myjoyonline.com | George Nyavor | [email protected]
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