A new report by the Natural Resource Governance Institute says Ghana may find it difficult to repay the US$2 billion Sinohydro loan expected to be paid with proceeds from the country’s bauxite resources.

The report, titled ‘Resource Backed Loans: Pitfalls and Potentials’, says countries that depend on resource backed loans like the Sinohydro-bauxite deal ran the risk of accumulating mounting debts due the secrecy of such agreements.

A resource-backed loan is a borrowing mechanism by which a country accesses finance in exchange for, or collateralized by, future streams of income from its natural resources, such as oil or minerals.

Ghana’s Integrated Aluminum Development Corporation, which manages the country’s bauxite reserves took the country’s new resource backed loan provided by Synohydro in order to develop infrastructure in exchange for future refined bauxite.

Ghana is obligated to repay a $2 billion loan it agreed with Chinese state company Sinohydro in 2018.

According to the extractive policy think tank, its analysis of the loan shows that it may prove hard to service, as the repayment schedule requires a rapid ramp-up of production and refining.

The analysis of the natural resource governance institute follows a similar assessment by the International Monetary Fund, IMF, which warns that delays in development in terms of expanding production could lead to potential loss of collateral.

Bauxite mining: Gov’t to settle on key investors by close of 2020

President Akufo-Addo has said that the Ghana Integrated Aluminium Development Corporation (GIADEC), will by close of this year, enter into joint venture partnership with investors for the mining of the country’s bauxite reserves.

Speaking at the 2020 State of the Nation Address in Parliament, the President said the move is part of government’s plans to boost the country’s industrialization agenda.

“We have decided at long last to explore our bauxite, manganese and iron ore deposits which allow us to establish an integrated bauxite and aluminum industry and iron and steel industry. The Ghana Integrated Bauxite and Aluminum Development Corporation and the Ghana Integrated Iron and Steel Corporation were established by law as the vehicles for this exploitation.”

Source: Citinewsroom.com