The International Monetary Fund (IMF), has revealed details about how Ghana’s four collateralized loans from China have exposed the country to the possibility of losing parts of its mineral resource revenue in addition to electricity sales in the future.
For Ghana, Chinese loans have been a reliable funding source for major projects since the year 2000. In two decades, Accra has racked up close to $5 billion from at least 41 Chinese loans.
After several years of near-unbridled borrowing, Ghana is now debt-trapped and wading through its worst economic crisis in a generation, with a current external debt portfolio exceeding $30 billion.
This loan agreement means in the event Ghana defaults on honouring its debt obligation, China has the right to use proceeds from Ghana’s oil, cocoa, bauxite, or even the sales from electricity to settle the debt.
In a lot of debt negotiations taking place within the developing world, China appears to be the most important party at the negotiation table. Although it is the largest bilateral lender in the world, it is opaque about its lending policies and how it renegotiates with distressed customers.
According to the World Bank, the planet’s poorest countries faced $35 billion in debt-service payments to official and private sector creditors in 2022, of which 40% was due to China alone.
Sources say the West African nation has contracted at least 8 collateralized loans from China with different mineral resources as security against default. As of the end of 2022, Ghana owed China $1.9 billion, out of which $619 million were collateralized loans.
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