Finance minister Ken Ofori-Atta and IMF Resident representative Natalia A. Koliadina
The International Monetary Fund has said government’s $2bn with China to provide infrastructure in return for processed bauxite, cannot be classified as a loan.
The clarification comes after the Minority in Parliament, led by Tamale Central NDC MP, Haruna Iddrisu petitioned Ghana’s economic supervisors over the deal.
According to the Minority, the deal should be considered a loan because government brought it to parliament using the provisions of the 1992 constitution on loan approvals.
“Let nobody attempt, through deception, to say that this is not a loan,” Minority Leader, Haruna Iddrisu said on the floor Parliament during the debate in July 2018.
Photo: Minority in Parliament
The Minority was keen to point out that the government, despite its ‘anti-borrowing’ rhetoric while in opposition was guilty of ballooning Ghana’s debt portfolio which stood at least 120bn cedis.
The government has insisted, it is a barter and said the constitutional provisions it used in bringing the deal to parliament, do not apply to loans alone but all international agreements.
Dissatisfied, the Minority petitioned the IMF in August and received a reply indicating, the Fund was unsure “given the complexity of the transaction”
It promised to discuss the deal at an IMF meeting in Washington, USA, where it would review Ghana’s Extended Credit Facility with the Fund.
That meeting has happened with the IMF declaring that in its preliminary view, the deal is not a loan.
It explained the $2bn worth of infrastructure from China would have constituted a debt if it was paid back with a government guarantee.
The IMF, however, expressed concern, the deal could increase Ghana’s debt levels if the agreement does not conform with the government’s overall debt strategy.
The Akufo-Addo government has said the deal is a creative solution to Ghana’s infrastructure deficit because it is “leveraging what you have to get what you don’t have”.
Vice-President Dr. Mahamudu Bawumia in his praised ability at simplification, called it ”government bringing land, so China will bring a tractor”.
The government has been criticised by the opposition for failing to match the former government’s drive to improve the country’s infrastructure.
The Akufo-Addo government sees the deal with China as an answer to this infrastructural challenge which would see the first-ever interchange in the Northern Region as well as the construction of important roads, hospitals, bridges and schools.
The construction work will be carried out by China-backed Sino Hydro Corporation with at least 30% local content.