The government has abandoned its interest in the remaining US$1.5 billion tranche of a $3 billion loan agreed with the China Development Bank (CDB) in 2011, because of a misunderstanding between the two parties.
The Minister of Finance and Economic Planning, Mr Seth Terkper, who made this known when he presented a mid-year review and supplementary estimates to Parliament yesterday, said “the remainder of the loan has been cancelled due to challenges that we have had in coming to an understanding with CDB”.
The loan was earmarked for financing infrastructure projects, including some for the oil and gas sector. As of June this year, only two out of the 12 projects anticipated under the facility had been financed by CDB, three years after the Master Facility Agreement (MFA) and other finance documents had been signed.
The minister was in Parliament to seek approval to spend an extra GH¢3.2 billion to fund additional expenditures in the revised 2014 budget.
Breakdown
Giving a breakdown of the Chinese loan disbursed so far, Mr Terkper said US$800 million had been released for the Western Corridor Gas Infrastructure Project (WCGIP) and US$150 million for the ICT enhanced Surveillance Project for the Western Corridor Oil and Gas enclave.
The facility was to be disbursed under two tranches: A and B, of US$1,500 million each. The projects that are currently underway are the tranche B facility projects.
New condition
According to Mr Terkper, “CDB has introduced a new condition precedent to the effectiveness of the subsidiary agreement for the two additional projects”. The CDB wants a “side agreement to amend some of the terms of the MFA, the Five Party Agreement and the Account Agreement”, he said.
According to the minister, officials of CDB want the loan facility to be recognised as an oil-backed transaction, contrary to the agreed position between CDB and the Government of Ghana (GoG) during the initiation of the transaction.
“Cabinet in June 2014 approved GoG’s capping of the facility at US$1,500 million to accommodate three additional projects. It also authorised the submission of the Side Agreement to Parliament for approval.”
