Chinese gov’t turns its back on Ghana

• Posted on July 16, 2015July 16, 2015
• by Nana Kwesi Coomson
• Comment

The Chinese government has turned its back on Ghana, refusing a loan application by the government for the construction of some three road projects.

The Mahama Administration has developed a reputation for indiscriminately acquiring loans, with Ghana’s current loan portfolio standing almost at GH¢90 billion from GH¢9 billion inherited from the Kufuor Administration in 2009.

In a letter dated June 26, 2015 and addressed to the Finance Minister, Seth Terkper, a copy of which was sighted by DAILY GUIDE, the Chinese government said the road projects in question are not viable enough for their support.

The Government of Ghana had applied for the loan from the Chinese government to help it construct the Accra Outer Ring Road project; the Mankessim-Agona Swedru-Nsawam Road Re-construction project and the Dodowa-Kpong & Somanya-Akuse Junction Road Re-construction project and four others.

But in a reply, the Chinese government said its concessional loan facility could not be used to finance projects which did not have good financial benefits.

“Having studied the documents for the above projects, we would like to advise you that according to the current guidelines by Chinese government, the Chinese government concessional loan and preferential buyer credit are mainly directed towards projects with good financial benefits and repayment abilities,” Mr Ji Chun, Regional Director of the Chinese government, said in a reply to the loan application.

“According to the relevant documents, these three road projects lack financial benefits. Thus, it appears that it’s not appropriate to utilise a Chinese concessionary loan to implement these projects,” Chun added.

Mr Chun said the loan was likely to increase Ghana’s debt burden if the Chinese government were to approve it.

“Therefore regarding these three projects, we suggest that your Ministry takes other financing resources into consideration,” the letter said.

It was unclear why the Chinese government turned down the loan request despite the strong relationship between the two countries.

Some critics believed that the rejection might not be unconnected with the termination of a digital migration contract previously awarded to Star Times of China.

The said contract had since been awarded to KNET, a Ghanaian company, where a deputy Minister for Communications had previously worked.

The Member of Parliament for OkaiKoi Central, Patrick Boamah, told Citi Fm that he believed the refusal of the loan agreement showed that China was punishing Ghana for terminating the contract with Star Times.

“I strongly believe that it has a relationship with that agreement because the Chinese, I know, have protested the way that the contract was terminated and I think government must make a statement on that particular project that KNET won, and why a Chinese lost out, having gone through an open competitive bidding and we will settle matters from there,” he said.

Ghana’s public debt is getting to GH¢90 billion, with fears that any more debt could plunge the country back into HIPC.

Government, having recognised the unsustainable levels of the loan repayment regime, is exploring other alternative means to manage the debt profile.

The NDC government has always trumpeted smart borrowing as one of its key agenda in managing the debts, but with the response of the Chinese government, it does not appear the loan application for these road projects is a smart one.

-Daily Guide