Ghana: ACEP Trains Journalists On Chinese Lending Strategy & Its Impact On Debt Sustainability

The African Centre for Energy Policy (ACEP) has organised a day’s workshop in Accra for media personalities from Ghana, Nigeria and other African countries.

The workshop, which was held on Wednesday, 12th March 2025, hinged on Chinese Lending Strategy and Ghana’s Debt Sustainability.

It was aimed at resourcing and educating the media on how to understand the Chinese lending strategy to enhance the knowledge of participants who write about such important subjects.

Taking participants through ACEP’s funding on Chinese lending strategy and Ghana’s debt sustainability, an analyst at the centre, Mr. Mohammed Saani Osman, stated that their research has exposed bottlenecks in Ghana’s debt sustainability to China and therefore recommended these steps to deal with it.

ACEP, through this medium, is proposing to government to adopt proactive measures to negotiate better lending terms, supported by cost-benefit analysis for such loan agreements in future.

“Ghana needs a long-lending strategy on how to contract loans, while ensuring long-term debt sustainability,” he stressed.

Additionally, ACEP recommends that government should prioritise medium to long-term benefits when engaging with China or other bilateral partners rather than seeking to fulfil short-term political gains.

Besides, the think-tank has tasked government to widen domestic resource generation mechanisms and promote private sector partnership in infrastructural development, including finding innovative financing models for infrastructural projects in the country.

Additionally, ACEP is tasking the media and civil society groups to take active interest in how government contract loans, so that they could point out holes in shoddy and shady loans which would not benefit ordinary Ghanaians.

Taking participants through the Chinese lending strategy, Mr. Osman said their research, which is yet to be published, found out that the Chinese use anti-Paris Clauses that are opaque in giving loans to creditors, and this makes it too expensive to service such loans.

“Characteristics of the Chinese lending oblige the borrower to refrain from seeking debt restructuring with the Paris Club,” he stated.

He also explained that since their loans are enveloped in opacity, it smacks of confidentiality clauses, making it difficult for little or no disclosure, concerning the size, scope and terms of payment.

“As of 2016, an estimated $200, about 50% of the total debt volume of Chinese loans, reported are hidden from official statistics”, the think-tank mentioned.

Another strategy deployed by this Asian giants is the use of resource-backed collaterals which, Mr Saani said, are typified by mortgaging Ghana’s oil and gas receipts for payment of $3bn master facility agreement, mortgaging our bauxite deposits for the repayments of the Sinohydro deal.

“The interest rates are equally high. Credit contracts in the Chinese sample, exhibit distinctively higher interest rates than those of other bilateral partners,” the analyst lamented.

Focusing on the key sector projects financed by the Chinese in Ghana’s sector, he mentioned the Bui Dam, the West Corridor Gas Infrastructure Project, Offshore Gas Gathering Pipeline, Early Phase Gas Processing Plant, Offshore and Gas Truck Pipeline, among many others.

Because of Ghana’s challenges in dealing with its debt serving, the country’s debt service to revenue-rate reached an all-time high of 127% in 2020 – the highest ever in the world according to the IMF in 2023.

Touching on how much of the loans was invested in the energy sector, he said that is about $148bn in loans between 2010 and 2018, which are mainly for infrastructural projects.

With reference to investment in Africa, ACEP said it is about $37bn committed to the energy sector.

Source: https://energynewsafrica.com