Former President, John Dramani Mahama says the terms for the US$1 billion syndicated loan that was presented to Parliament for approval hold unfavorable terms which cannot be in the interest of the Ghanaian people.
Last two weeks, the finance minister, Ken Ofori Atta, took a US$1 billion syndicated loan to Parliament for consideration and approval. The loan is made up of a US$250 million component from a consortium of banks comprising Standard Chartered Bank, Rand Merchant Bank, and Standard Bank of South Africa and a US$750 million component from the AFRIEXIM Bank.
This, the Former President noted, is inimical and will have grave implications for the economy if approved. He made this known at the inaugural launch of a new policy think-tank, Think Progress Ghana.
“The terms of this loan are extremely unfavourable and cannot be in the interest of the Ghanaian people. It will add a colossal GH¢8 billion to our public debt in one fell swoop. The cost of insurance alone for the US$250 million component is US$40.625 million. Total interest payable and other costs on this US$250 million, five-year tenor loan, amounts to US$86.85 million,” the Former President said.
“The total cost, therefore, for borrowing the US$250 million component amounts to US$127.50 million. For the US$750 million component, interest payment and other costs excluding insurance premium and or collateral, come up to US$383 million over its seven-year tenor. Put together, the US$1 billion loan agreement will cost the taxpayer US$351 million in interest and other charges.”
According to him, the very limited options the country has, in view of the messy state of the economy means that any further borrowing would be very expensive and detrimental to the interests of Ghanaians.
He further stated that the repayment schedules of both components meant that the current government will be saddling any new government that replaces it with an additional US$1.438 billion to pay within five to seven years starting from the first quarter of 2025.
This, added to the US$2.7 billion in 2025 and 2026 Eurobonds, the next government will have to cough up over US$3 billion or, at the current exchange rate, GH¢24 billion, within 15 months of taking office just to retire and service four loan items
In essence, the US$3 billion needed for this will nearly wipe out the net international reserves which will seriously undermine the economy.
“In the four years between 2025 and 2029, US$3.7 billion or approximately GH¢30 billion will be required to retire maturing Eurobonds alone. This will be in addition to the tens of billions of cedis in debt service payments for other loans that will have to be paid from 2025,” Mr. Mahama said.
He noted that unlike the situation in 2017 when the current government inherited the Sinking Fund, which was set up under the erstwhile government, with over US$500 million to help retire maturing Eurobonds.
“This government has put no such mechanism in place and will leave the new administration bare. Even worse is the fact that this government has collateralized almost all revenue streams and is seeking to collateralize more including gold royalties under the dubious Agyapa deal,” he said.
In view of the grave implications, the Former President said: “We in the NDC cannot lend support to the US$1 billion syndicated loan agreement and our MPs are poised to oppose and vote against it in Parliament.”