Ghana struggles to repay $1.3 billion Cocoa loan due to poor rainfall

Ghana Cocoabod announced that it may not be able to fully pay back $1.3 billion loans collected from its lenders. The world second largest grower of Cocoa, Ghana will only produce about  700,000 tonnes of cocoa this season, which is below the initial forecast of 850,000 tonnes due to poor rainfall during the main crop harvest. This was made known by the CEO of the Ghana Cocoabod, Joseph Boahen Aidoo in an interview with Reuters.

“We are only praying that we’ll be able to meet our collateralized facility because the crop wasn’t as good as anticipated. We just started paying the first installment in February,” Aidoo told Bloomberg.

Five months ago Ghana Cocoa Board signed a $1.3 billion loan with international banks to fund purchases for the 2017/18 season, which was due to open in October 2017. The loan was signed in Paris with 25 banks led by Crédit Agricole Corporate and Investment Bank, Standard Bank, Natixis, Rabobank, Ghana International Bank and Sumitomo Mitsui Banking Corporation.

While Ghana may not achieve its forecast for the season, it is also selling cocoa at a loss after it chose not to lower prices for farmers despite the drop in global prices by a third from July 2016 through the end of last year.

The  International Cocoa Organization (ICCO) estimates that Ghana produced around 950,000 tonnes of beans last season, though much of that is believed to have consisted of smuggled Ivorian beans. Although Aidoo said smuggling has been minimal during this period despite a significantly higher farmer price in Ghana than in Ivory Coast.

What is the Cocoacod doing to cover its deficit?

According to Aidoo’s interview with Reuters, the Cocobod is issuing cocoa bills to fund the deficit via the central bank, which it already owes about 5.5 billion cedis. The sector regulator was negotiating to have that debt restructured.

The Cocobod planned to seek around $1.3 billion in September via its annual syndicated loan to cover purchases of an estimated 900,000 tonnes of cocoa next season but it seems it has been put on hold. It has also put on hold plans to borrow around $500 million from China Eximbank. This is because it had received encouraging feedback from the African Development Bank (AfDB) for a $1.2 billion loan that would cover much of the same expenditures.

“Our request has received a very positive response and we are confident of having the loan,” Aidoo said.

Apart from Ghana, Ivory Coast is also in talks with the AfDB for a loan to finance projects aimed at boosting processing capacity and creating storage facilities capable of housing buffer stocks.