IMF bounces NDC over Sinohydro deal

The International Monetary Fund (IMF) has stated that the $2 billion barter deal between the Akufo-Addo administration and Sinohydro Corporation of China that is going to bring about massive infrastructural development, especially in the road sector, cannot constitute a loan.

The official response from the IMF has left the opposition National Democratic Congress (NDC) flatfooted, as it tried to sabotage the whole arrangement recently.

It emerged that NDC took a collective decision to carry out the sabotage which was allegedly backed by former President John Mahama.

According to sources, the opposition party is pushing hard to thwart the deal so that President Akufo-Addo and his government would fail to initiate any tangible developmental projects, especially roads, before the 2020 general elections.

That way, they will turn around to taunt President Akufo-Addo for failing to significantly develop the country which would give them electoral advantage.

Official Confirmation

Information Minister-designate, Kojo Oppong-Nkrumah, confirmed on radio that the IMF Team met officials at the Ministry of Finance and later the Finance Committee of Parliament and confirmed that the arrangement with the Chinese cannot qualify as a loan.

He said the IMF determined that the arrangement is not backed with a government guarantee after the NDC Minority in Parliament reported the government to the Bretton Woods institution to punish Ghana for going for a loan.

Barter Transaction

The barter transaction is basically tied to some massive bauxite deposits in the country where the government is expected to repay with relined bauxite (alumina/aluminum).

The government has been insisting that the whole transaction is barter and also declared that the constitutional provisions used in bringing the deal to parliament do not apply to loans alone but all international agreements.

The NDC, sensing that the $2 billion barter agreement could serve as a catalyst for infrastructural development of the country and possibly dwindle its electoral fortunes, dashed to the IMF’s Office in Accra on August 10 to attempt to get the Bretton Woods institution to classify the agreement as a loan which will end up increasing the country’s debt stock.

Illegal Deal

They wanted the IMF to stop the deal because they claimed it was ‘illegal’ even though the same political grouping had helped in passing the agreement in Parliament before the House went on recess in late July.

The opposition party members on the Finance Committee deliberated on the Master Project Support Agreement (MPSA) between the government of Ghana and Sinohydro Corporation Limited for the $2 billion for the construction of priority infrastructural projects before the committee’s report was laid in the House for approval.

Complex Transaction

Last month, the IMF’s resident representative in Accra, Natalia Koliadina, in response to a letter written and signed by Minority Leader, Haruna Iddrisu, and Cassiel Ato Forson, who is a ranking Member of the Finance Committee, said she could not readily give an answer to the queries raised by the NDC because of the complexity of the transaction.”

“You asked the IMF opinion on whether the agreement between the government of Ghana and Sinohydro Corporation should be classified as government debt under the programme, and whether it would contribute to the stock of government debt,” the resident representative said.

“We will use the definition of government debt in the Technical Memorandum of Understanding which has not changed since the inception of the programme to make this decision.”

The IMF said, “Given the complexity of the transaction, I am unable to answer your question immediately. I have been in consultations with headquarters, including the Legal Department, and we are going to discuss this issue with the authorities during the upcoming seventh review mission under the Extended Credit Facility.”

DAILY GUIDE has learnt that the first tranche of $500 million has already hit Ghana’s accounts to allow the commencement of the projects.

Bawumia Factor

The Vice-President Dr Mahamudu Bawumia, who led the Economic Management Team to negotiate the agreement with the Chinese, has already described the deal as a game-changer.

He said the NPP government wants to prove to Ghanaians what $2 billion can do for a nation like Ghana.

Priority Projects

The priority projects of the government of Ghana to be funded under the MPSA comprise: rural electrification, construction of hospitals and clinics, bridges, interchanges, roads, affordable housing, fishing landing sites, and other projects that would be identified by the government of Ghana.

Tamale, the hometown of Haruna Iddrisu, will be witnessing its first interchange in history under the Chinese deal.

Finance Committee

Chairman of the Finance Committee of Parliament, Dr. Mark Assibey Yeboah, explained that under the MPSA, Sinohydro would be responsible for arranging the project financing for all the priority projects subject to the mutual agreement of the parties.

“Sinohydro shall be solely responsible to enter into the financing agreement (s) with any financial institution that agrees to provide the project financing,” he said when the agreement was being approved.

He also said the committee was further informed that the MPSA is essentially a “barter” facility under which Sinohydro will implement various EPC contracts for Ghana and the government repays with relined bauxite (alumina/aluminum).

Already the Integrated Alumina Development Authority Bill has been passed by Parliament awaiting presidential assent to kick-start Ghana’s industrialization process.

“To enhance and maximise the value to Ghana of its bauxite resources, the committee was informed that government, through the Ghana Integrated Bauxite and Alumina Development Authority (GIBADA), will establish a bauxite processing plant to process the raw bauxite into alumina before shipping same to service the obligations under the MPSA,” he said, adding “presently raw bauxite is said to trade at about $24/tonne on the international market whilst processed alumina trades at more than $300/tonne.”