Ghana said on Thursday that the $6 billion it is seeking from the Export-Import Bank of China through an existing $13 billion Chinese credit facility would fund new transport, education and health projects in the West African state.
Ghana, which is heading toward presidential elections in December, had said in August last year that it was seeking to land the $6 billion loan from the ExIm Bank, but had not said how it planned to use the funds.
President John Atta Mills landed one of the biggest Chinese loan agreements in Africa when he visited China in 2010 and signed a framework totalling $13 billion. Ghana is currently using some $3 billion from the China Development Bank through the framework for energy infrastructure and roads.
The drawdown of another $6 billion loan could raise concerns about Ghana's public finances. The country is already struggling to stick to a 2012 deficit target of 5.2 percent of national output excluding oil due to higher-than-expected wage claims and the continued cost of fuel subsidies.
Vice President John Mahama met with the head of the ExIm Bank last week to discuss details of the proposed loan deal, Deputy Finance Minister Seth Terkper said, adding the talks “went well” but that they remained in the early stages.
“It was one of the first meetings we had when we arrived in China,” Terkper said. He said Ghana was hoping to use the funds for road building, schools and hospitals, as well as to improve water and electricity infrastructure.
Terkper said Ghana was seeking the new social infrastructure loan in three $2-billion tranches. But he said the government was going into the negotiation aware that the intended projects may not generate the needed funds for repayment.
Ghana became the continent's newest oil and gas producer when it started pumping from its Jubilee field in December 2010. It is also the world's second largest cocoa grower and a major African gold miner.
But the Bank of Ghana on April 13 warned that a slide in the value of the local cedi currency - which has fallen more than 11 percent so far this year versus the greenback, “could act to offset the gains made in macroeconomic stability.”
The Bank raised its prime interest rate 100 basis points to 14.5 percent in an effort to support the cedi. - Reuters