Parliament approves historic $3b China loan facility but Minority abstains
Parliament on Friday August 26, 2011 endorsed the famous $3 billion Masters Facility Agreement between the government of Ghana and the Republic of China Development Bank (CDB), but with members of the Minority abstaining.
Debate to the motions, which was postponed on Thursday August 25 2011, found space today Friday, amidst intense tension, uproar and heckling.
It was approved by popular acclamation with the Minority remaining silence when Mr Doe Adjaho First Deputy Speaker, who presided the sitting, put the question.
However a thunderous “aye” from the Majority sealed the historical contract.
The two-tranche credit facility each with $1.5 billion, which have different terms, is the biggest loan facility Ghana has clenched in recent time.
The first tranche has five year grace period, 15 years re-payment period; a commitment fee of one per cent flat, an interest rate of 2.95 per cent and six months LIBOR (London Inter-Bank Offer Rate) and an upfront fee of 0.25 per cent flat.
The second tranche of 1.5 billion dollars had a grace period of five years, ten years tenure interest rate of 2.285 per cent and six months LIBOR, 0.25 per cent upfront fees per annum and a commitment fee of one per annum.
The joint Finance and Poverty Reduction committees report on the loan said the goal of the facility was to enhance efficiency and effectiveness of the oil and gas sector operations as well as industrial minerals processing ventures and agro industrial ventures.
The report stated that the Master Facility would be disbursed under individual subsidiary project agreements (Subsidiary Agreement) to be signed between implementing agencies and the contractors for the construction and establishment of projects to be financed from the facility.
Actual disbursement of the funds would be for projects for which the Subsidiary Agreement had been approved by the Government of Ghana through Parliament and the China Development Bank (CDB).
The projects earmarked with the first tranche of the loan are Western Corridor Renewal Project with railway components, Western Corridor Infrastructure Renewal Project – Takoradi Port Phase 1 Retrofit Rehabilitation, and the Sekondi Free Zone Project, which include the development of onsite infrastructure and utility services for the proposed industrial minerals processing estate and Alumina Refinery.
The projects in which the second tranche would be invested are Deployment of ICT–based integrated platform to enhance security and surveillance of all infrastructure and facilities in the Western Corridor Oil Enclave, Accra Metropolitan ICT-enhanced Traffic Management project to include an accelerated completion of stranded road construction works on key congested road arteries and Small and Medium Enterprise (SMEs).
The report stated that benefits to be derived from the projects under the facility included added value within a relatively short time to the nation’s gas resources by developing it to its fullest to the benefit of the country.
It stated that projects under the two tranches would be implemented concurrently to ensure the desired timely impact.
Repayment according to the report would be effected from the petroleum revenue and other government owned resources.
It is for this reason according to the report that a commercial contract for the off-take of oil would be entered into by the Ghana National Petroleum Corporation and the Chinese Authorities.
The report stated that the Government would reduce the impact of commercial projects on the public debt through an on-lending and escrow arrangement for most of the projects under the facility.
It stated that 15 per cent counterpart funding would be paid from the “Owner Contribution Account” to be established as sub-account under a main Collection Account to be established under the Bank of Ghana into which Government of Ghana would deposit funds towards the repayment of the facility.
Again government intended to repay the facility through Annual Budget Funding Amount (ABFA) in accordance with the Petroleum Revenue Management Act 2011.
Under clause three of the Master Facility Agreement, a minimum of 60 per cent of each tranche was required to be paid to the People’s Republic of China (PRC) contractors, a clause which allowed 40 percent of the facility to be applied towards local content sourcing or sources other than the PRC.
Source: GNA