Business
Ghana: Chinese loan challenges IMF
The International Monetary Fund (IMF) looks set to bend its rules this month to accommodate Ghana’s rush to raise a US$700 million loan from China to build a gas processing plant and pipeline from the two billion barrel offshore Jubilee oil field.
Work has to start quickly on the gas project, which has been held up by bureaucratic wrangling, if Ghana is to avoid technical problems with managing the gas from Jubilee.
China’s Sinopec International Petroleum Service Corporation, which is pre-financing construction and engineering work, will be the main contractor for the processing plant and pipeline, with France’s Technip and United States’ Intecsea in support. Engineers are due to start work imminently. The project would give Chinese companies the leading role in the development of Ghana’s gas industry and a guaranteed supply of low sulphur crude oil.
This month, the IMF decides on the financing issue. As a condition of a US$590 million extended credit facility from the IMF signed in July 2009, Ghana agreed to limit its commercial borrowings to US$800 million a year. The Chinese gas loan would breach that ceiling. Unless Ghana can secure a waiver from IMF directors, it could face financial penalties on its loans with the IMF and the World Bank, which could spark a political row with Accra.
Communications Minister Haruna Iddrisu says the government could break with the IMF over the issue ‘because we are a sovereign country’. An official in Osu Castle says that President John Evans Atta Mills has told Finance Minister Kwabena Duffuor to do everything possible to ensure that Ghana secures the Chinese loan, even at the expense of IMF membership. Some in the governing National Democratic Congress (NDC) want to push ahead with an even bigger borrowing programme from China.
The most likely outcome is that the US$800 million ceiling on Ghana’s commercial borrowing will be adjusted to accommodate the Chinese loan, a senior IMF official told Africa-Asia Confidential, but ‘certain procedures would have to be followed’. Yet there could be legal problems if the government signs a final agreement for the loan – as some in Accra are advocating – before the IMF board decision.
