Narrowing of fiscal space the reason for resource-backed loans in SSA – NRGI
The Natural Resource Governance Institute (NRGI) has said the narrowing of fiscal space due to increasing debt as well as limited access to external financing are the main reasons for resource-backed loan (RBL) agreements on the African Continent.
According to the NRGI, a study by the African Development Bank (AfDB) indicates that the debt composition of many African countries is changing from commercial and concessional loans to resource-backed loans (RBLs).
China, the NRGI notes, has become a major player in the space making a total of 1,104 loan commitments worth $153 billion in RBL agreements with African countries between 2009 and 2014.
RBL agreements entered in by African countries and China have often been criticized by the NRGI.
The criticism by the NRGI is based on the opacity of information or details of the said agreements.
The opacity of information contained in the agreements, a report by the NRGI asserts, is due to confidentiality clauses in the loan agreements meant to restrict borrowers from disclosing loan terms.
Speaking at an NRGI/ACEP forum in Accra on RBL, West Africa Director Anglophone of the NRGI called for transparency in RBLs agreement.
According to her, transparency and access to RBL agreements help stakeholders understand all the important details of the loan agreements, adding it also helps African countries successfully request for debt restructuring from creditors.
Commenting further on the RBL agreements between African Countries and China, Ms Chinery advised African governments to mindful of Chinese entities as they will always put their interest before the interests of the sovereign state.
In Ghana, a resource-backed loan (RBL) agreement entered into by the government with China was the $2 billion Sinohydro deal.
The government sealed an agreement with the Chinese government to sell refined bauxite to China’s Sinohydro Group Limited and in return receive $2 billion to undertake infrastructure projects in the country.
The agreement among others was to fund infrastructure projects in Ghana, including roads, bridges, interchanges, hospitals, housing, railway development as well as rural electrification.
Critics of the agreement have argued that the loan agreement is not in the interest of Ghana and would add up to Ghana’s debt stock, claims the government rejected.
