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China in Africa: The Real Story

Unpacking China Eximbank's $10.4 Billion Ghana Credit

Deborah Brautigam

Ghana-China flags. Ghanaweb.com
..
On September 22, 2010, as I was flying back to Washington from Beijing, the government of Ghana announced it had signed a $10.4 billion credit package with China Eximbank. The finance is expected to begin disbursing next year (over how many years is not clear). It would be, it is said, at "concessionary" rates (not yet disclosed) and repayable over 20 years. No Chinese source has yet confirmed this, as far as I know, particularly the "concessionary loan" aspect. China Development Bank reportedly has clinched a separate loan for $3 billion which will be targeted toward oil sector development.

The $10.4 billion credit will be repaid with exports, not directly through the budget, according to Ghana's deputy minister for finance and economic planning. Does this sound familiar? It should, if you've been reading my book: see pp. 46-49 of The Dragon's Gift.

Although this is being described in Ghana as a "concessionary loan" I doubt that this finance comes from the Eximbank's concessional loan (you hui dai kuan) window.  And I doubt we can count the package as official development assistance (ODA), or that it will be on terms concessional enough to qualify as ODA.

Eximbank has given several true concessional foreign aid loans to Ghana in the past. Indeed, as research by Isaac Idun-Arkhurst (see his slide #10) has shown us, 42% of Ghana's Bui Dam loan package from China was a true concessional loan, i.e. qualified as ODA, while 58% was an export credit at a preferential commercial rate.

One piece of evidence in favor of Ghana's interpretation (and hope): the credit is said to be payable over 20 years. Concessional loans from Eximbank, or you hui dai kuan, do tend to have 20 years as a repayment period.

However, this is what I expect to see.

As details of the new Ghana deal unfold, it will be revealed as another of the well-priced "long term trade agreements" or deferred payment, resource-backed commercial export credits, where the interest rate will be based on LIBOR plus a margin. Nigeria had an offer of one of these. But when former Nigerian president Yar'Adua and former finance minister Shansuddeen Usman looked more deeply into the "concessionary loan" they thought Nigeria was getting, they found that only the $500 million export credit portion was at a preferential rate. The $2 billion portion was at a commercial rate.

I hope Ghana is getting a better deal than Nigeria was offered. The deal still needs to be approved by Ghana's parliament, which means we should be hearing a lot more about it.