Ghana cocoa regulator seeks central bank funds to cover shortfall

ACCRA: Ghana's cocoa industry regulator is seeking central bank funds to finance the rest of the 2016/17 season after a $1.8 billion loan to purchase the crops ran out early, two sources close to the transaction told Reuters. 

The additional funds, which could amount to hundreds of millions of dollars, will come in the form of a loan or bonds and will enable Cocobod to purchase the smaller mid-crop that typically runs from July to September, the sources said.

Ghana is the world's second biggest producer of cocoa behind neighbouring Ivory Coast, and ensuring sustainable funding is crucial because the crop is among its top foreign exchange earners. 

The shortfall creates a headache for the regulator as Ghana's new government tries to stabilise national finances under an International Monetary Fund programme and restore rapid economic growth. 

"They are going to go to the central bank to borrow to buy the rest of the cocoa. From the central bank they will borrow hundreds of millions of dollars," said a senior Cocobod official who declined to be identified. 

A senior government official confirmed Cocobod was approaching the central bank for additional financing. 

The sources gave no timeframe or detail of the deal, and there was no immediate comment from the Bank of Ghana or Cocobod. 

Each September, the regulator secures an international syndicated loan that enables licensed buyers to purchase cocoa from smallholders for export. But Cocobod's new chairman Hackman Owusu-Agyemang said in March the loan had been used up. 

Officials link the missing money to mismanagement, while allegations of corruption at Cocobod under the government of former President John Mahama have emerged since President Nana Akufo-Addo's government came to power in January. 

"Cocobod is under enormous investigation. The Ministry of Agriculture has thoroughly cleaned up the place," the government official said. 

Central bank finance would enable Cocobod to avoid paying domestic borrowing rates, which would be higher. 

Turning to the international debt market, on the other hand, could make it harder to secure the $1.3 billion Cocobod says it needs to finance next season, the sources said. 

Cocoa purchases stood at 691,149 tonnes as of March 23, from the start of the 2016/17 season on Oct. 1 and the country is on track to exceed its 800,000-tonne target. 


Copyright Reuters, 2017