Ghana has taken a decisive step to end its reliance on international syndicated loans to finance its cocoa sector, breaking with a 32-year tradition that has underpinned the country’s economy.
The Ghana Cocoa Board (Cocobod) announced that it will source funding domestically for the upcoming cocoa season, which begins a month early on September 1.
The decision, revealed by Cocobod’s Chief Executive, Joseph Boahen Aidoo, signals a strategic shift as the board seeks to “wean itself” off external borrowing. Historically, Cocobod has raised at least $1 billion annually through syndicated loans to finance cocoa purchases from farmers and supply essential inputs like seedlings, fertilizers, and chemicals.
However, amid Ghana’s ongoing debt restructuring and faltering cocoa output, the board was able to secure only $600 million last year, as international lenders grew increasingly wary of the country’s creditworthiness.
This pivot to domestic financing comes after reports emerged that negotiations for a $1.5 billion bridge loan from cocoa traders such as Barry Callebaut AG and Olam Group Ltd. had stalled.
The decision to forgo foreign borrowing altogether introduces new challenges for the Bank of Ghana, which has traditionally relied on the lump sum of foreign currency that accompanies the annual syndicated loan to manage exchange rate volatility.
Going forward, the central bank will need to wait for revenue from cocoa sales—denominated in dollars—to gradually build its foreign reserves.
Compounding the pressure on Ghana’s cocoa sector is a reduction in the harvest target for the 2024-25 season by 20% to 650,000 tons, driven by adverse weather, disease, and a lack of fertilizers.
These supply constraints have already pushed cocoa futures prices to exceed $11,000 per ton earlier this year, further complicating the outlook for the world’s second-largest producer of the chocolate-making ingredient.
Cocobod’s move to tap into domestic funding reflects a broader need for resilience in Ghana’s financial strategies amid global uncertainties and internal challenges. As the country navigates this transition, the implications for both the cocoa industry and the broader economy will be closely watched.
Source:norvanreports.com