Finance Minister, Seth Tekper yesterday hinted on the floor of Parliament the Government’s intention to present before the august House a request to half the unarguable the most talked about $3 billion China Development Bank ($3bn CDB) loan to $1.5bn
Mr. Terkper gave this indication when he presented the Mid-Year Review and a revised budget and macroeconomic targets for 2014 in accordance with Article 179(8) of the constitution and also to seek approval for supplementary Estimates of GH¢3,196,855,671 for the rest of the 2014 fiscal year.
The Master Facility Agreement (MFA) on the above referenced loan was signed by the China development bank (CDB) and Government of Ghana (GoG) in the PRC on December 16th 2011, following the IMF Board’s approval on December 14th, 2011 for increasing Ghana’s commercial borrowing ceiling for 2011 from US$$800 Million to US$3.4 Billion.
The MFA was signed by Ghana’s Ambassador to the PRC with a Power of Attorney from the Minister for Finance & Economic Planning. Other Finance Documents under the MFA were submitted to Parliament in December 2011 and were under consideration by the joint Finance and Energy Committees before Parliament rose for the year on December 21st 2011.
The MFA was targeted at financing some key projects like the Takoradi-Kumasi Western Corridor Infrastructure project, the Sekondi Free Zone project, the ICT enhanced surveillance project for the western corridor oil and gas enclave project, among others.
The Finance Minister explained that the “CDB has introduced a new condition precedent to the effectiveness of the subsidiary agreements of the two additional projects, namely a side agreement to amend some of the terms of the MFA as well as the five-party agreement and account agreement.”
He said, “based on the advice from the Ministry of Finance and the Attorney General’s Department, Cabinet in June 2014 approved the government of Ghana’s capping of the facility at 1.5 billion U.S dollars and it has also recommended that the side agreements in their suitable forms should be brought to the House for consideration.”
He explained that “what this means is that government and this house [Parliament] will be called upon to take advantage of the provisions under the MFA to amend it in order that the loan facility would be reduced from $3bn to $1.5 billion”. .
The five-party agreement between government, Bank of Ghana (BoG), Ghana National Petroleum Corporation (GNPC), CDB & UNIPEC Asia, and the Ministry of Finance and Economic Planning (MoFEP) sets out the structure and key contractual obligations of each party under the transaction.
Government under the agreement is obligated to open and maintain the transaction accounts, BoG to ensure timely and legal transfers of repayments to CDB accounts and to open and maintain standby letters of credit; GNPC to supply and UNIPEC’s to purchase crude oil to support repayments and MoFEP to oversee and manage the loan and the projects.
