The International Monetary Fund (IMF) has warned that Ghana may not be able to repay the US$2 billion bauxite-backed-loan agreement with Chinese state company, Sinohydro China.
This will be after China would have devastated the Atiwa Forest Reserve for its bauxite side of the deal and would have potentially destroyed flora and fauna relied upon by over 5 million Ghanaians and countless rare animal species.
The IMF’s warning is captured in a new report released by extractive mining think-tank Natural Resource Governance Institute (NRGI) titled: “Resource-Backed Loans: Pitfalls and Potential”.
The report quotes the IMF’s waring to several countries that have fallen for China’s Resource-backed loans, saying it has had crippling effects on debt levels for many companies that have signed on and had been worsened by the fact that the deals are often shrouded in secrecy.
Despite heated criticisms, the Akufo Addo administration insists that the Sinohydro loan will boost Ghana’s integrated aluminium industry and will have an important spin-off for major infrastructural projects across the country.
Ghana has given up to 5% of its total estimated bauxite deposit to China in the Atewa Forest, much to the anger of environmental advocates, including Hollywood star Leonardo di Caprio.
There is so much at stake for African economies and communities with resource-backed loans, but there is very little accountability and transparency and that has to change, said Silas Olan’g, NRGI Africa co-director in the report. “Borrowers and lenders must allow for greater scrutiny to ensure that these loans are sustainable and serve the interests of the people and the countries they are supposed to benefit,” he said.
“The deals may already have been signed in Ghana and Guinea, but it’s not too late to come clean about the terms of the loan and to involve the communities who will be affected by the mining in meaningful discussions.”
Experts have consistently warned Ghana that the Sinohydro deal is a debt trap set up by China that has caught several poor countries worldwide by surprise. In Africa, countries like Zambia, Uganda, Kenya, etc., are all caught firmly in the grips of China after corrupt politicians simply blew the seemingly cheap money and found themselves at the wrong end of China’s repossession men when the time was due for the debt repayment.
In Zambia, Zesco, the state-owned national electricity company is on the verge of being taken over by a Chinese power company, in Kenya, some key part of their main port has been converted by China, among several similar experiences across the countries baited by China.
Experts claim that if Ghana fails Ghana is likely to fail in its repayment obligations policy think-tanks such as IMANI have warned that the so-called bauxite resources given to China would not be enough to repay the Sinohydro deal and that there must be a hidden condition outside the prying eyes of the public.
In the event of non-payment by Ghana, China could deploy a variety of creditor measures such as ambushing Ghana’s export trade, or taking over key public infrastructure.