[ 2016-11-01 ]

Terkper hunts for US$2bn from China
The government has revived talks with the China
Development Bank (CDB) for the remainder of the
almost US$2 billion loan facility it abandoned in
2014.


The government suspended discussions with the
Chinese bank after the country utilised the first
tranche of US$ 1 billion from the US$3 billion
loan agreed with China in 2011.
The Finance Minister, Mr Seth Terkper, told the
Graphic Business in an interview that a government
task force is currently in China to renegotiate
the deal. When it becomes successful will be
repaid by leveraging revenue flows from the supply
of lean gas from Ghana’s Jubilee field.

“There is a task force that is working with the
ministry of Finance and the power ministry to
continue the negotiations with the China
Development Bank in order that the CAP of $1.5
billion that was placed is removed,” Mr Terkper
said.

He said “The CDB disbursed $1bn of the $3bn and
the government placed a CAP on $1.5bn. It should
be noted that CDB has disbursed approximately US$1
billion for the Atuabo Gas Plant, pipelines from
the Jubilee field and other infrastructure.”

Task force in China

“The mandate of the task force is to discuss
further utilisation of the outstanding US$500m and
the remaining US$ 1.5bn if possible because these
are already covered by the government,” Mr
Terkper said.

The premise of CDB facility is in tune with
Ghana’s self-financing strategy, which states
that proceeds from any commercial project must be
used to pay for the loans which financed the
project, not paid from taxes as public debt.

The Finance Minister explained that the revenue
from crude oil sold at international market price
at Brent benchmark price and the resources are
repatriated to the Bank of Ghana(BoG) and used to
service the facility.

“When crude oil prices fell, the source of
financing for the entire facility became
insufficient, so disbursement was stopped,” Mr
Terkper said.

“This time we will use lean gas from the Jubilee
oil field to pay for the remainder of the loan. We
need that US$1.5 billion now.”

It is expected that the potential for the energy
sector in the country, which include crude, gas
and lean gas will be used to finance the
facility.

Oil, including direct sales to China, as well as
other revenues, will be used to repay the loan but
Chinese firms will be handed the majority of the
contracts for work funded by the cash, the report
said.

“This will ensure that the loan is not put on
the tax payer to increase public debt, the
projects will pay for themselves”, Mr Terkper
said.

Cocobod’s example

This he said is in consonance with the
government’s focus on insisting that state
institutions follow the Ghana Cocoa Board’s
example in using the proceeds from projects to
repay loans.

The Ghana Airport Company, he said is using the
airport tax and other charges to develop the
airport. The Ghana Ports and Harbours Authority is
also using proceeds from the port to pay for its
expansion projects.

“This is part of a broad strategy of finding
alternative and more prudent ways to fund
infrastructure projects in the country and this is
working today.”

“We are not going to be putting the loans of
commercial project on tax payers as public debt.
Ghana has a potential gas from three fields
Jubilee TEN and Sankofa but this deals if for only
lean gas from Jubilee”, assured. We would
develop similar strategies for the TEN and Sankofa
Oil and gas fields”, the Finance Minister
rationalised.

Analysts say, the country is depending on a
ramp-up in oil output at the Jubilee and TEN oil
fields to revive economic growth, which the
International Monetary Fund(IMF) forecast will
slow to 3.3 per cent this year, the lowest rate in
more than two decades.

Commercial contracts

Ghana and China are due to establish a commercial
contract to oversee China’s offtake of Ghana’s
oil as part of the loan repayments. Upfront fees
are 0.25 per cent and commitment fees are one per
cent per year for both tranches.

The government has said it would use Chinese loans
to finance infrastructure projects and transform
its economy through gas- and oil-driven
industrialisation.

Ghana is Africa’s second-largest gold miner, a
major cocoa producer, which started pumping oil
in December 2010 and became a commercial oil
exporter in 2011.

At the time, the IMF in 2010 warned that the
Chinese loan was good for the country and does not
contravene any debt limitation conventions with
the them.

But the IMF has warned that Ghana’s oil revenues
may initially only cover the costs of its recently
agreed public sector wage hike.

Source - Ultimatefm

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