China will have access to Ghana’s mineral revenue, electricity sales in default of 4 loans.
The International Monetary Fund (IMF) has provided detailed information regarding how Ghana’s four loans, secured by collateral, from China have exposed the country to potential loss of revenue from its mineral resources and electricity sales in the future.
Ghana has relied on Chinese loans as a consistent source of funding for significant projects since the year 2000. Over a span of twenty years, Accra has accumulated nearly $5 billion from at least 41 loans obtained from China.
After years of extensive borrowing, Ghana finds itself trapped in debt and grappling with its most severe economic crisis in many years. The country’s current external debt portfolio surpasses $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 many debt negotiations involving developing nations, China seems to hold the most significant position at the negotiation table. Despite being the world’s largest bilateral lender, China maintains a lack of transparency regarding its lending policies and its approach to renegotiating with financially distressed borrowers.
News Credit: ABC News