$2bn Sinohydro deal not loan agreement – IMF

The International Monetary Fund (IMF) says the $2 billion Sinohydro agreement with Ghana cannot be classified as a loan.

The IMF formed this preliminary view on the Master Project Support Agreement (MPSA) after it concluded its mission visit to Ghana recently.
Sources say this position of the Fund is based on Ghana’s debt limits under the country’s current programme with the IMF.

The Fund is arguing that the deal must be designed in a way that is consistent with government’s overall debt strategy, value for money and should be well monitored.

Meanwhile, JoyBusiness is also learning that the deferred payments agreements for individual projects could constitute a debt to the extent that they are signed with a government guarantee.

A source close to the IMF said: “the timing and nature of the deferred payment agreement will be critical for the programme.”

Background

After a petition from the Minority in Parliament on the IMF’s verdict on the classification of the Sinohydro deal, the Fund forwarded the issues raised about the deal to its team of experts for advice.

The Minority MPs had written to the International Monetary Fund (IMF) with a copy to the World Bank to stop the deal on grounds that it is ‘illegal’.

But Parliament last Saturday approved the $2 billion MPSA between the government and Sinohydro Corporation Limited of China for the construction of priority infrastructure projects in Ghana.

The MPSA is essentially a barter facility under which Sinohydro will implement various contracts for Ghana and the state will repay with refined bauxite (alumina/aluminium).

The objective of the agreement is to improve road infrastructure for enhanced intra-urban, regional and national road traffic flow and pursue rural electrification, affordable housing and fishing landing sites.

It is also to strengthen economic and regional integration and reduce the cost of doing business in the country.

Other issues that came up during the IMF visit

During their visit, the Fund also raised issues about revenue mobilisation and its impact on the existing programme, while linking the cedis’ current performance to external issues.

IMF also wanted the Bank of Ghana to complete its clean-up campaign of the banking sector.

The IMF also underscored the importance of the recent bank resolution to financial stability and the need to complement it with actions to prosecute insider abuse and establish accountability.

Sources say the IMF also wants the clean-up of the non-bank institutions to be completed.

This could be linked to the recent comments by the Governor of the Bank of Ghana that insolvent savings and loans would be collapsed.
Status of programme completion

It is, however, not clear for now whether the country has passed those critical requirements that would help the country complete the IMF programme come April 2019.

The IMF team has been in town since last week to assess Ghana’s performance under the Extended Credit Facility.

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