China rejects Ghana’s loan application for road projects

The Chinese government has turned down a loan request by the government of Ghana for the construction of some three road projects.

In a letter dated June 26, 2015 addressed to the Finance Minister Seth Terkper, the Chinese government says the road projects in question are not viable enough for them to sponsor.

Ghana had applied for a loan from the Chinese government to construct the Accra Outer ring road project; the Mankessim-Agona Swedru-Nsawam Road Re-construction project and the Dodowa-Kpong & Somanya Akuse Junction Road Re-Construction project and four others.

But in a reply the Chinese government says its concessional loan facility cannot be used to finance projects which do not have good financial benefits.

“Having studied the documents for the above projects, we would like to advise you that, according to the current guidelines by Chinese government, the Chinese government concessional loan and preferential buyer credit are mainly directed towards projects with good financial benefits and repayment abilities,” Mr. Ji Chun Regional Director of the Chinese government said in a reply to the loan application.

“According to the relevant documents, these three road projects lack financial benefits , thus it appears that it’s not appropriate to utilize a Chinese concessionary loan to implement these project, Chun added.

Mr. Chun said the loan is likely to increase Ghana’s debt burden if the Chinese government were to approve it.

“Therefore regarding these three projects, we suggest that your Ministry take other financing resource into consideration,” the letter said.

Ghana’s public debt has hit 89 billion cedis with fears any more debt could plunge the country back into HIPC.

Ghana & China in diplomatic row?

Although the above reasons have been cited for the refusal of the loan, suggestions are that there could be a diplomatic row between the two countries over Ghana’s cancellation of the Digital Terrestrial Television migration contract with Chinese firm, StarTimes.

Government last week announced it had given the contract to a Ghanaian owned company, K-NET, which is offering a cheaper deal.

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According to Ghana, StarTimes had breached the contract by delaying in securing funding although the deadline for the migration is fast approaching.

The company among other things alleged that the cancellation was manipulated by the Deputy Communications Minister, Ato Sarpong, who once worked for the new company K-NET.

StarTimes has since served notice it would be seeking a judgment debt of 200 million dollars for wrongful termination of contract.