I was surprised that many Ghanaians and particularly the media expressed surprise about the utter rejection of a loan request made of the Chinese Exim Bank by the Ghanaian government (NDC) to help the country execute some road projects.
The Chinese government in a letter to the Ministry of Finance, simply concluded that the “three-road projects lack financial benefits, thus it appears that it’s not appropriate to utilize a Chinese concessionary loan to implement these projects. Otherwise, it may increase the debt burden of your country.” The Chinese suggested rather mockingly that the government consider “other financing resources.”
Three years ago ( 2012), our think tank, IMANI, warned the NDC government when it intended to seek a $3bn loan facility from the Chinese Development Bank (CDB) for varied infrastructural development. At the time IMANI did predict accurately that it was highly doubtful that, in the short term, Government of Ghana shall be able to satisfy the strict credit requirements of the China Development Bank in order to secure the entire $3 billion mentioned in the government’s framework agreement with the state-owned Chinese bank.
IMANI again predicted that “we suspect 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.” I am sure everyone knows today that not more than $1bn was received from the initial loan request for the very reasons the Chinese Exim Bank is rejecting the latest loan request for some road infrastructure. In seeking to understand the likely pace of disbursement of the $1 billion that was eventually disbursed out of the expected $3bn IMANI advised that we needed to understand the CDB’s own lending history and technique.
IMANI then advised that we should bear in mind that Chinese financial institutions are adopting global standards of credit and risk evaluation and have therefore the increasingly little propensity to pump money into half-baked or unready projects. Increasingly, their expectations of quality and rigour, and in particular profitability, are as high and as tough to meet as those of any financial institution anywhere on the globe.”
Fast forward- 2018 IMANI asked the NPP government for clarity in an alert titled, IMANI ALERT: Government Must Clarify A Whole Lot in the Bauxite-Barter Deal with China. IMANI Recommends How Government Should Proceed.
Where are we with that project again?