China Eximbank provides RMB 754 million government concessional loan for Polytechnics, Technical and Vocational Training Centers Upgrading Project

Project narrative

In 2010, Government of Ghana requested funding from the People's Republic of China to finance the rehabilitation and development of ten (10) Technical Institutions, five (5) Polytechnics and the Technical Examinations Unit of the Ghana Education Service. The scope of work was later increased to thirteen (13) Technical Institutes and ten (10) Polytechnics/Technical Universities. Then, on May 19, 2015, the Government of the People’s Republic of China and the Government of the Republic of Ghana entered into a preferential loan framework agreement for the Polytechnics, Technical and Vocational Training Centers Upgrading Project. China Eximbank and the Government of Ghana then signed an RMB 754,000,000 ($119,101,946) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2015) 7 TOTAL NO. (546)] on April 19, 2018 for the Polytechnics, Technical and Vocational Training Centers Upgrading Project. The GCL agreement was subsequently approved by Ghana’s Parliament on March 26, 2018. The GCL stipulates the following borrowing terms: a 2% per annum interest rate, a 0% default (penalty) interest rate, a grace period of 5 years (60 months), a maturity period of 20 years (240 months), a commitment fee of 0.25%, and a management fee of 0.25%. The proceeds of the GCL were to be used by the borrower to finance a commercial contract [Contract No. AVIC/GHZ/11M5003] worth $119,101,986 between AVIC International Holding Corporation and the Ministry of Education of Ghana, which was signed on July 4, 2012. According to the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS), as of May 2022, the $119,101,946 loan (GCL) achieved a 59.5% disbursement rate, with China Eximbank making 9 loan disbursements (worth $70,881,491.66) between 2019 and 2021: a $30,875,764.80 (RMB 195,433,591.18) disbursement for an advance payment (to the EPC contractor) on July 19, 2019, a $2,160,068.21 (RMB 15,440,087.26) disbursement on July 10, 2020, a $6,866,684.40 disbursement on October 16, 2020, a $9,324,144.65 disbursement on November 19, 2020, a $6,227,953.00 disbursement on February 18, 2021, a $1,773,111.45 disbursement on March 25, 2021, a $3,489,547.95 disbursement on April 30, 2021, a $6,987,896.00 disbursement on August 20, 2021, and a $3,176,321.20 disbursement on November 30, 2021. The loan’s (principal) amount outstanding was GHS 275,770,000 ($49,244,642) as of December 31, 2020. As of May 2022, the loan’s grace period had not yet expired and the total amount outstanding (including principal and capitalized interest) was $70,881,491.66. The project involves 9 components: i. Upgrading of five Polytechnics in the country with modern equipment; ii. Upgrading ten Technical Institutes with modern equipment; iii. Construction of laboratories and equipping laboratories of five Polytechnics and ten Technical institutes; iv. Construction and equipping the Technical Examinations Unit of the Ghana Education Service; v. Provision of standby diesel-powered generators to all five Polytechnics and Technical Institutes in Ghana; vi. Training of selected lecturers of the Polytechnics and Technical Institutes in China; vii. Chinese teachers to carry out trainer-of trainees training in Ghana; viii. Provision of after sales service and maintenance of equipment; and ix. Provision of boreholes for all five Polytechnics and ten Technical Institutes. The ultimate purpose of the project is to help build state-of-the-art training facilities for over 30,000 annual students to learn mechanical engineering, automobile engineering, civil engineering, and welding engineering, among other skills. The project will support 15 different institutions throughout the country. These institutions range from Polytechnic Universities to lower-level technical training locations. The official Communication Bureau of Ghana list the institutions as follows: Bolga Technical University, Cape Coast Technical University, Kumasi Technical University, Sunyani Technical University, Tamale Technical University, Tema Technical Institute, Ashiaman Technical Institute, Comboni Technical Institute, St. Pauls Technical Institute, Takoradi Technical Institute, Kumasi Technical Institute, Bawku Technical Institute, St. Josephs Technical institute, Sunyani Methodist Technical Institute, and Cape Coast Technical Institute. AVIC International Holding Cooperation is the general contractor responsible for implementation. Mina Amo and Ghana's Ministry of Education are also identified as implementing agencies in the Ghana Development Cooperation Management Information System (Gh-DCMIS). Groundbreaking ceremonies have been held on various dates, including on November 11, 2019 with attendance by Ghana's Vice President Bawumia and Vice Premier of the State Council Sun Chunlan. The project’s originally expected implementation start and end dates were April 19, 2018 and May 18, 2023, respectively. The project was ultimately completed ahead of schedule on April 12, 2022. There are some indications that the China Eximbank loan for the Polytechnics, Technical and Vocational Training Centers Upgrading Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). There are some indications that the China Eximbank loan for Phase 1 of the Kpong Water Expansion Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Then, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans. China Eximbank suspended loan disbursements for the Polytechnics, Technical and Vocational Training Centers Upgrading Project in 2023.