Parliament approves $115m loan agreements for devt projects

Mr Ken Ofori-Atta, Minister of Finance

Mr Ken Ofori-Atta, Minister of Finance

Parliament by a resolution approved three loan agreements totaling US$115 million to fund some development projects in the country, before bringing to an end its five-day emergency meeting on Friday.

 

They include the drawdown agreement for US$30 million which formed part of a US$95 million facility to finance the establishment and strengthening of Agricultural Mechanisation Service Centres (AMECs).

 

The rest are a US$35 million World Bank facility to finance the proposed Public Sector Reform for Results Project and a US$50 million International Development Association facility to finance the Ghana Commercial Agriculture Project (GCAP)

 

The first tranche of US$30 million of the AMECs facility, secured under the erstwhile John Mahama-led administration, was released in 2014.

 

It was among other things intended to support the creation of new AMECs with the view to improving agricultural productivity and invariably increase the incomes of smallholder farmers and create jobs for the youth.

 

Terms and conditions of the AMECs facility are a fixed interest rate of 0.50 per cent per annum to be paid semi-annually for 30 years consecutive installments, with first interest payment occurring six months from the date of shipment of each consignment, repayment of each principal value of the Letter of Credit in 21 consecutive semi-annual installments and first principal payment due on the 60th month counted from the date of each shipment.

 

The Finance Committee’s report on the performance of the first tranche, seen by the Ghanaian Times said “in a bid to make the machinery and equipment more accessible to farmers and mechanisation service providers, provided a subsidy rate of about 60 per cent on the machinery.”

 

According to the report, 90 per cent of the machinery and equipment received have been allocated to beneficiaries across the country “either on outright payment or on hire purchase” adding that “recovery rate from beneficiaries stood at over 87 per cent.”

 

For the second and third tranches, the committee said to make the equipment more accessible to farmers, the Ministry of Food and Agriculture had approved a new subsidy regime of 40 per cent.

 

“As to why the subsidy has been reduced from 60 per cent on the first tranche to 40 per cent on the second and third tranches, officials of the Ministry of Food and Agriculture explained that the ministry took the decision being mindful of the huge cost of subsidy to government as well as other interventions that government has put in place lately to assist farmers,” the report stated.

 

On the support that the deal would give to government’s agricultural strategy, the report said the high cost of capital had made it unattractive for the private sector and farmers to invest in agricultural mechanisation, hence the need to have this arrangement to support the agricultural sector.

 

The aim of the GCAP facility is to increase access to land, private sector finance, input and output markets by smallholder farmers from public-private partnerships in commercial agriculture in the Accra plains and the country’s savanna region.

 

With a grace period of five years, the facility has a repayment period of 25 years, a maximum commitment charge of 0.50 per cent per annum, a service charge of 0.75 per cent and an interest charge of 1.25 per cent per annum.

 

Components of the deal include facilitating investment promotion in commercial agriculture, promoting private sector investment and smallholder linkages in selected areas, rehabilitation and modernisation of irrigation schemes and project management and monitoring and evaluation.

BY JULIUS YAO PETETSI

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