$2bn China Sinohydro deal not loan – IMF
It would cost government $1bn to produce bauxite needed to pay China back for its $2bn worth of infrastructure investment in Ghana.
This is according to research group, IMANI Africa which has expressed concerns over government’s agreement with China.
Under the deal described as a barter, China’s state corporation, Sinohydro borrows from its government and comes to build roads, bridges and dams worth $2billion.
The government has agreed to pay back by processing its huge bauxite deposits in Kyekyewere, Mpasaso and Kyirayaso in the Ashanti region.
The government has called it creative, the opposition National Democratic Congress (NDC) has called it a loan
and while the IMF has ruled out calling it a loan, it has not called it a barter.
The IMF has said, it is complicated. Explaining the implications of the Sinohydro deal, President of IMANI Afrca, Franklin Cudjoe argued although it is not a loan, government “without a doubt” needs a loan to operationalise the agreement.
He explained, Sinohydro needs its money back whether from selling bauxite to it or cash down.
It will, therefore, be prudent for the government to go for a loan “immediately” which should be some 8% of the $2bn and place the money into an escrow account, the policy expert advised.
Sinohydro will draw down on the account as payment for the deal when repayment starts in 2021, he said.
This will be a mitigation measure especially if government is unable to attract significant sums of money from its bauxite processing activities.
A loan could also be needed because to process raw bauxite to be given to the Chinese, government needs a factory and building a factory needs money, Franklin Cudjoe said.
And government has three years grace period to get ready to pay back Ghana’s newfound major economic partner, China.
“Ghana needs to enter into a loan agreement with anybody at all” to fund the production cost of the bauxite processing factory, Franklin Cudjoe said on Joy FM’s Super Morning Show Thursday.
Ghana has 12 years to pay off the loan starting from 2021.
But the member of government’s Economic Management Team Dr. Mark Assibey-Yeboah has explained government will not go for a loan to build a factory.
Instead, the government has invited proposals for a joint venture with a private entity which will be building the factory.
Government has set up the Ghana Integrated Bauxite and Alumina Development Authority to supervise the exploration of the mineral resource believes to be worth $450bn in deposits.
Dr. Mark Assibey-Yeboah who is also the Chairman of the Finance Committee said Franklin Cudjoe is “dead wrong” on the need for government to go for a loan.
He dispelled fears the Sinohydro deal could become a debt on Ghana’s books if government fails to process the needed amount of bauxite.
“Don’t we have bauxite? Are we not setting up a …partner to refine the bauxite? And so what are the fears?” he dismissed, calling the agreement with the Chinese a “perfect arrangement”.
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