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Ghanaian CSOs urge transparency in use of RBLs for development financing

AS the Ghanaian government considers various means of development financing to bridge the country’s infrastructure gap, Civil Society Organisations (CSOs) in the country have urged more transparency in the use of Resource-Backed Loans (RBLs) for development projects.

Speaking at a day’s forum last week to analyse the risks and impacts of RBLs as a source of development financing, the CSOs argued that although this type of financing could yield positive results for the country, lack of transparency in the process could cost the country dearly in value-for-money and during the repayment period.

‘More transparency regarding the structure and governance, terms of agreements, repayment conditions among others, is important. These disclosures will enrich public discourse and help highlight the impact of these arrangements on public finances, project execution and corruption risks associated with RBLs,’ said the CSOs.

Highlighting some RBLs in Ghana’s specific case, Denis Gyeyir, the Africa Programmes Officer for the Natural Resource Governance Institute (NGRI), conceded that some of those agreements with China had yielded positive impacts on the country’s development.

In 2007, Ghana contracted a loan of $598 million from the Import and Export Bank of China (China Exim Bank) for the construction of the Bui Dam. This loan was later increased by about $76 million 2012, with all these backed by cocoa sales to China on specific terms.

He also alluded to the China Development Bank (CDB) loan agreement for the Western Corridor Gas Infrastructure and other projects. So far,  part of the facility has been utilised  for the construction of the Atuabo gas processing plant and the  Accra Intelligent Traffic System in the country, with several speed cameras installed in the capital.

For this, China International United Petroleum & Chemicals Co. Ltd. (UNIPEC) Asia, a wholly owned oil trading subsidiary of China Petroleum & Chemical Corporation (SINOPEC) was to lift 13,000 barrels per day of Ghana’s unencumbered Jubilee crude oil entitlement for 15 years.

Similarly, in 2018, Ghana entered into a reported $2bn  agreement with Sinohydro Corp, a Chinese state-owned hydropower and construction company. Under the Master Project Support Agreement, Sinohydro is expected  to finance and execute the construction of infrastructural projects in Ghana.

In return, Ghana shall grant Sinohydro access to 5 percent of its bauxite reserves and earnings from a yet-to-be established bauxite refinery over a period.

‘Despite some of the controversies, these RBL arrangements have provided an opportunity to develop and expand infrastructure in beneficiary countries,

‘Ghana’s CDB loan for instance helped to eliminate the dreaded practice of gas flaring and gas reinjection while guaranteeing relatively cheaper natural gas supply for power generation and industrial use as well as 30 percent of the liquefied petroleum gas (LPG) used in the country,’ Gyeyir pointed out.

He repeated the caution  that  while these deals could address burning development challenges, they could also pose setbacks to the economy.

‘These loans provide an avenue to sign opaque deals, create repayment challenges and limit benefits to borrower countries. For instance, with the CDB Loan, China began to demand for more security with the plummeting oil prices in late 2014/15 as a condition for Ghana’s access to the entire $3bn,’ Gyeyir recalled.

He added that lessons from such experiences with RBLs should inform the structuring and negotiation of such deals in future.

‘RBLs are very relevant for meeting developmental needs but if the terms are not well structured to ensure value for money for the recipient country, they have the potential to erode all expected benefits,’ he stressed.

On his part, Benjamin Boakye, Executive Director for the Africa Centre for Energy Policy (ACEP), pointed out that the widespread use of confidentiality clauses in the Chinese loan agreements and other RBLs, poses risks to transparency and accountability.

He stated that although, in the agreements themselves, there was nothing untoward to warrant the kind of non-disclosure clauses the partners agreed to, the opacity could be used to conceal the identity of beneficial owners related to these agreements.

Steve Manteaw, a resource governance expert, blamed the rush to enter into RBL agreements for development on the narrow tax bases that most resource-rich countries operate, limiting their mobilization of domestic revenues.

He urged Ghana and other resource-rich countries to diversify their economies, broaden the tax base and ensure higher domestic resource mobilization, to limit the dependence on RBLs.

To achieve its Sustainable Development Goals, Ghana is expected to invest at least $9.3bn or 13.9 percent of the 2019 GDP equivalent in infrastructure alone annually until 2030.

The government, therefore, dreamed up the highly controversial ‘Agyapa’ deal to secure financing through foreign stock markets on the back of future royalties from the exploitation of the country’s mineral resources.

Several governments in Africa have also sought severally to use their abundant mineral and oil wealth to fund their massive infrastructure deficits, with total infrastructure financing on the continent projected to cost $4.3 trillion until 2040, or an annual investment forecast of $174bn.

According to a 2020 report by NRGI, sub-Saharan African countries including Ghana, Sudan, the Democratic Republic of Congo, Angola, and Guinea, had used RBLs to secured funding for infrastructure and other purposes between 2004 and 2018.

 

Source
Koku Devitor

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