The Governor of the Bank of Ghana, Dr. Ernest Addison, has said reduced domestic interest rates will empower local banks to participate in the cocoa syndicated loan.
COCOBOD is seeking to raise 1.3 billion dollars to finance the 2020/2021 crop season.
But some financial analysts have maintained that the funds used in purchasing cocoa beans would have been retained in the country if more local banks participate in the process.
Appearing before Parliament’s Public Account Committee, Dr. Addison stated that there is the need to work on interest rates to encourage local banks fund cocoa purchasing.
“This is an important matter primarily because interest rates in Ghana have been relatively high, therefore, COCOBOD has found the syndication to be cost effective. I think that as we bring domestic interest rates down, then financing the entire crop from domestic resources will be better. We have to work towards financing cocoa purchases from our domestic banking system as we bring inflation rates down,” he said.
Ghana’s cocoa industry is a major contributor to government revenue and GDP. It employs approximately 800,000 farm families spread over nearly half of the sixteen regions of Ghana, and generates about $2 billion in foreign exchange annually.
But the COVID-19 containment measures such as the lockdowns, border closures, and social distancing that were announced by government disrupted and dampened economic activities in the country.
Also, most international trading commodities experienced plummeting prices with cocoa also being affected.
This led some banks to reduce interest rates on loans given to businesses or defer interest payments due to the economic impact of the COVID-19 pandemic.
Already, the Monetary Policy Committee of the Bank of Ghana earlier this year reduced the rate at which it lends to commercial banks by 1.5 percent; from 16 to 14.5 percent.
COCOBOD’S launch of $600 million AfDB syndication loan
Ghana’s cocoa regulator, COCOBOD, recently signed a loan facility for productivity enhancement programs of the cocoa sector.
The $600m syndicated receivables backed loan, which was signed in November last year, follows two years of negotiations between COCOBOD and Development Finance Institutions including African Development Bank (AfDB), Japan International Cooperation Agency (JICA), Development Bank of Southern Africa, Credit Suisse AG among others.
The funds are expected to shore up local production of cocoa especially as demand soars amid the novel Coronavirus pandemic.
Already, COCOBOD has drawn ¢200 million from the AfDB to embark on various cocoa projects including pollination and pruning.