China Eximbank provides EUR 140.8 million buyer's credit loan for Ghana Rural Telephony and Digital Inclusion Project

On May 13, 2020, China Eximbank and the Government of Ghana signed an EUR 140,814,285.10 ($154,670,410.75) buyer's credit loan agreement [ID#1420313022020211419] for the Ghana Rural Telephony and Digital Inclusion Project. The loan carried a 2.5989% interest rate. The other borrowing terms of the loan are unknown. However, it is known that the borrower is expected to use the proceeds of the loan to finance a commercial contract with Huawei Technologies Co., Ltd. and China National Technical Import and Export Corporation (CNTIC). It is also known that the borrower purchased a buyer’s credit insurance policy from Sinosure. As of May 2022, the EUR 140,814,285.10 loan achieved a 60.2% disbursement rate, with China Eximbank making 10 loan disbursements (worth EUR 84,788,048.33) between 2021 and 2022: an EUR 9,064,285.10 disbursement to pay for 85% of the cost of a Sinosure insurance premium on September 15, 2021, an EUR 15,54,699.35 disbursement to make a payment to Huawei on September 29, 2021, an EUR 9,807,363.98 disbursement to make a payment to CNTIC on October 29, 2021, a EUR 23,351,064.63 disbursement to make a payment to Huawei on November 26, 2021, an EUR 5,142,798.41 disbursement to make a payment to CNTIC on December 1, 2021, an EUR 4,316,846.90 disbursement to make a payment to Huawei on January 5, 2022, an EUR 1,213,646.40 disbursement to make a payment to CNTIC on January 5, 2022, an EUR 5,990,156.35 disbursement to make a payment to Huawei on April 15, 2022, and an EUR 10,647,187.21 disbursement to make a payment to CNTIC on April 18, 2022. As of April 18, 2022, the loan’s total amount outstanding (including principal and capitalized interest) was EUR 84,788,048.33. The purpose of the project is to improve the overall quality of mobile communication networks by building wireless mobile networks in rural area. It involves the provision of telecommunication infrastructure to towns and communities where Mobile Network Operators (MNOs) do not operate and deploy more than 2,016 telecom sites in 172 rural areas. Huawei Technologies Co., Ltd. will deploy its ‘Rural Star’ solution to deliver voice and data services in remote communities. These services are expected to reach over 3.4 million rural residents, increasing Ghana’s national coverage rate for voice and data access services from 83% to 95%. The ‘Rural Star’ solution, which uses Relay Remote Node (RRN) wireless backhaul, is powered by solar energy and can be installed on a simple pole, making it around 50% cheaper to deploy than the microwave or satellite transmission typically used for rural connectivity. Once the rollout is complete, it is expected that mobile operators will be able to lease the network. The head of Ghana Investment Fund for Electronic Communications (GIFEC), Abraham Kofi Asante, has said that “[p]artnering with Huawei on this project…will ensure that all persons in Ghana are part of government’s digitization agenda, and improve the socio-economic wellbeing of people living in Rural Ghana.” Communications Minister Ursula Owusu-Ekuful has also noted that “[w]e selected Huawei as a partner in this rural network project as we have seen Huawei’s unremitting efforts in bridging the digital divide.” On November 4, 2020, the first site was successfully launched by the President of the Republic of Ghana, His Excellency Nana Addo Dankwa Akufo-Addo at Atwereboana, a rural community located in the New Edubiase District of the Ashanti Region. The project was originally slated for completion in September 2021; however, some implementation delays have been encountered. In 2021, a total of 506 towers were erected out of the acquired 1,054 sites. Two network operation centers have been put into operation in Accra and Kumasi and 800 communities have been provided with broadband infrastructure. In 2022, the project will seek to reach 1,400 additional sites with voice and data services to ensure reliable, affordable, and secured broadband infrastructure across 12,000 rural communities. There are some indications that the China Eximbank loan for the Ghana Rural Telephony and Digital Inclusion Project may be financially underperforming 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.

Additional details

1. The Chinese project title is 加纳农村通信及数字网络覆盖项目. 2. The face value and currency of denomination of the loan are drawn from the Ghanaian Ministry of Finance's Annual Public Debt Report for the 2020 Financial Year (accessible via https://mofep.gov.gh/sites/default/files/reports/economic/2020-Annual-Public-Debt-Report.pdf). 3. The Loan/Grant Code in the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS) is CN-2020-01. The project identification number in the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS) is GHA/000865. 4. No sources explicitly state that this is a buyer's credit loan. AidData assumes this is the case for the following reasons: (1) The loan is provided to a foreign borrower, (2) the loan is denominated in EUR, (3) the face value of the loan is explicitly identified in multiple official sources, (4) the loan is used to finance a commercial contract with a Chinese company, and (5) the loan was insured by Sinosure via its export buyer's credit insurance service, which is specifically used when banks are providing buyer's credit financing. 5. The loan's interest rate (2.5989%) is drawn from the World Bank's Debtor Reporting System (DRS). See https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0 and https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 6. The (principal) amounts outstanding are drawn from the Ghanaian Ministry of Finance’s Annual Public Debt Reports. These amounts are reported in GHS by the Ministry of Finance. AidData has estimated the USD amounts by applying the average GHS-to-USD exchange rate in 2020 (5.6-to-1) and the average GHS-to-USD exchange rate in 2021 (5.2-to-1).

Number of official sources

8

Number of total sources

24