The country’s international reserve is set to receive a major boost as the first tranche (US$ 910 million) of the US$1.3 billion annual cocoa syndicated loan is expected to hit the Bank of Ghana’s accounts in the first week of October.
This will improve forex liquidity in the country which will help strengthen the Cedi against the country’s major foreign trading currencies, particularly, the United States dollar. It will also help to restore some certainty in the market and help traders, industry and corporates to plan with some level of predictability.
The remaining US$390 million is expected to be drawn down between November 2022 between February 2023 based on the operational needs of the Ghana Cocoa Board (COCOBOD).
This came to light when Parliament approved the US$1.3 billion syndicated loan to finance the purchase of cocoa beans in the 2022/23 crop season.
The facility is to enable COCOBOD to raise funds to purchase an estimated 850,000 tonnes of cocoa beans from farmers through Licensed Buying Companies.
It will also be used to finance other operations of the board for the year under consideration.
The terms of a receivables-backed trade finance facility is between COCOBOD and a consortium of banks and financial institutions, with the Government of Ghana as guarantor.
The House also approved the waiver of stamp duty amounting to the cedi equivalent of US$6.5 million on the arrangement to finance the cocoa purchases for the same period.
Terms of the loan
The loan will come with an interest rate of 1.75 per cent per annum, a commitment fee of 35 per cent of margin and an arrangement and participation fee of 1.25 per cent.
Repayment of the principal is to be effected by seven monthly equal instalments, beginning February 2023 and ending August 2023.
The approval of the loan followed, after the Chairman of the Finance Committee in Parliament, Kwaku Kwarteng, had presented the committee’s report on the agreement and moved a motion for the House to adopt it.
The report noted that the cocoa industry had been the backbone of the country’s economic development over the years.
It said cocoa production had increased significantly since the 1999/2000 crop season, reaching an all-time high of over one million metric tonnes in the 2010/2011 and 2020/2021 seasons.
The report noted that the increase in the levels of cocoa production required substantial financial resources to enable COCOBOD to promptly pay farmers for the purchase of cocoa beans.
It said the syndicated loan arrangement which had been in place for the last 30 years was, therefore, necessary.
US$600 million AfDB loan
The committee in its report also noted that COCOBOD had received US$350 million out of the US$600 million loan facility from the African Development Bank (AfDB).
It said the money was used to finance COCOBOD’s Productivity Enhancement Programmes (PEPs), which included farm irrigation, hand pollination and rehabilitation of moribund farms.
The report said these critical activities were aimed at ensuring the sustainability of the cocoa industry and improved yields in the medium to long term.
The committee was also informed that the remaining US$250 million had been cancelled due to uncertainties with crop forecast, unfavourable prices and the need for COCOBOD to focus on the rehabilitation programme.