Gov’t negotiates to access remaining US$3bn Chinese loan

Government is in strategic negotiations with Chinese authorities to access the remainder of the US$3 billion loan for energy and gas infrastructure projects, Seth Terkper, Finance Minister has said.

 

This loan will be repaid by leveraging revenue flows from lean gas from the country’s Jubilee oil field. The China Development Bank (CDB) disbursed US$1billion of the US$3billion loan and government placed a CAP on US$1.5billion. The disbursement was to finance the Atuabo Gas Plant, pipelines from the Jubilee fields and other infrastructure.  

Mr. Terkper, speaking in an interview explained that there is a Presidential task force, under the Chairmanship of Mr. Ato Ahwoi that is working with the Ministry of Finance and Foreign Affairs to continue the negotiations with the CDB in order that the CAP of the US$1.5 billion loan that was placed is removed.

“We already had some discussion in Beijing, China to set the framework for this. The terms of reference of the taskforce is to discuss the US$500 billion and the possibility of the additional US$1.5billion, and the CAP whether it can be brought back,” he said.

The Taskforce, he mentioned, is to table again strongly the principle of self-financing and to argue with the Chinese that the price of crude is so volatile that, “if we complement it with a lean gas and the by–products coming out, we have a better chance of maintaining stability in terms of repayment and bringing on board the US$1.5billion.”

Outlining the terms of reference of taskforce, Mr. Terkper mentioned that the team has no power to enter into any agreement, rather they are expected to submit their recommendations which will be tabled in Cabinet for onward submission to Parliament.

 “If any of their recommendations including use of funds is outside the original master facility agreement and subsidiary agreement we have to go back to Parliament on the advice of the Attorney General.

“The premise of CDB facility is in tune with our self-financing strategy, which states that processed from any commercial project must be used to pay for the loans which financed the project, not paid from taxes as public debt,” he said.

He explained that revenue from crude oil sold at international market price at Brent benchmark price and the resources are repatriated to the Bank of Ghana and used to service the facility. 

“When the crude oil prices fell that source of financing the loan became inadequate and that is why disbursement of the entire US$3billion loan was stalled. It is always envisaged that the potential for the energy sector in the country is not always just crude it includes gas and lean gas which is under reference now. 

Hence, other sources of financing the facility include revenues from crude and lean gas which will ensure that the loan is not put on the tax payer to increase public debt, there projects will pay for themselves.

This, Mr. Terkper said is in consonance with the government’s focus on insisting that state institutions follow the Ghana Cocoa Board in using the proceeds from projects to repay loans. This being done by Ghana Airport Company which 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 their expansion projects.

This is part of a broad strategy of financing alternative and more prudent ways to fund infrastructure projects in the country and this is working today, he said.

“We are not going to be putting the loans of commercial projects 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. We would develop similar strategies for the TEN and Sankofa Oil and gas fields,” he remarked.