The International Monetary Fund (IMF) has provided information regarding how Ghana’s four collateralized loans from China have put the government at risk of losing future energy sales as well as a portion of the earnings from its mineral resources.
Over the years, Ghana has relied on Chinese loans as a consistent source of funding for large-scale projects.
As a result of the government’s failure to make its debt payments, China is now required to utilize a portion of the money it makes from selling minerals like oil, bauxite, cocoa, in addition to sales made from electricity.
China seems to be the most significant negotiator in many of the debt talks taking place in developing countries. Even though it is the biggest bilateral lender in the world, it is secretive about its lending policies and how it renegotiates with troubled clients.
According to the IMF, collateralized loans make up $619 million of the $1.9 billion in loan agreements Ghana had with China as of the end of 2022.
“Collateralized debt is any contracted or guaranteed debt that gives the creditor the rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt,’’ the IMF noted in a statement sighted by 1Family Radio.
Additionally, the Fund has asked the government to offer loans or derivatives in equal amounts for all encumbered assets used as security.