Ghana signed a $1 billion lending agreement with China Development Bank Corp. as part of the biggest loan in the country’s history that Vice President John Dramani Mahama said would provide hundreds of thousands of jobs and develop natural gas.
Ghana signed an $850 million agreement for a gas project between the Ghana National Gas Co. and China Petroleum & Chemical Corp. (600028) in Beijing and the rest for information technology projects, Mahama said. The total amount of the loan will eventually be $3 billion and Ghana will send China 13,000 barrels of oil a day that will be sold at market price on the day, he said.
China is Africa’s largest trading partner and has signed agreements worth billions of dollars with governments on the continent, seeking natural resources to feed its economic growth in exchange for building roads and railways, and nurturing a market for its products.
The Ghanaian oil is not being used as collateral for the loan, Mahama said. The money will not be paid off using the country’s natural resources, he said.
“China has emerged as a significant source of credit to Africa, traditionally our partners have been the World Bank and the IMF,” he said in an interview, referring to the International Monetary Fund. “The process for accessing World Bank and IMF credit has been unfortunately quite tiresome and comes with a lot of strings.”
China’s Export-Import Bank lent $67.2 billion to sub- Saharan Africa between 2001 to 2010, overtaking World Bank lending of $54.7 billion, Fitch Ratings estimated in a Dec. 28 report. Beijing-based China Development Bank has handed out $7 billion to more than 30 countries in Africa, Wang Yuan, the bank’s chief economist, said Nov. 5.
“We still continue to rely on multilateral funding from the World Bank and the IMF but we need quite some massive amount of money for investment in infrastructure and we find it is easier to go to the BRIC countries,” he said, referring to Brazil, Russia, India and China.
The deal would help complete another 45 kilometer (28 mile) pipeline to bring natural gas to the shore, officials told reporters. A plant to process gas for power generation that would be piped to the Western region will be built, with Sinopec as the contractor, Mahama said.
Ghana’s rising debt levels are a concern as the government risks overspending before this year’s elections, restricting the West African nation’s credit rating, Fitch said in November. Ghana’s borrowing comes eight years after Ghana won $3.5 billion in debt relief from the IMF and the World Bank.
Ghana’s oil find will add about a $1 billion annually to the national revenues, officials said in Beijing.
China imported 132,208 tons, or 2,655 barrels a day, of oil from Ghana in 2011, which is 0.05 percent of China’s total 2011 oil imports, according to customs data. Ghana began production of crude for export at its offshore Jubilee field in December 2010.
China Development Bank is the largest bank for overseas financing with foreign-currency loans outstanding of more than $200 billion, according to its website. It also runs the China- Africa Development Fund, which has committed almost all of its first $1 billion, Chi Jianxin, the head of the fund, said in December.
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