Ghana is set to secured its annual loan to fund cocoa purchases at a historically high interest rate, a consequence of this year’s debt restructuring that diminished investor appeal for the West African nation.
Two individuals familiar with the deal’s terms revealed that international banks have committed to lending the Ghana Cocoa Board (Cocobod) $800 million for cocoa purchases from farmers at an interest rate approaching 8%. This marks the most expensive syndicated facility obtained by Cocobod since the inception of the annual loans in 1992-93, according to the sources who requested anonymity as the transaction is not yet public.
Traditionally, Cocobod has secured loans at more favorable rates than the government, averaging around 2%. However, this year’s negotiations were complicated by Ghana’s debt restructuring, a prerequisite for accessing a $3 billion government bailout from the International Monetary Fund.
As the world’s second-largest producer of cocoa, Ghana heavily relies on foreign funding to compensate farmers for beans that are subsequently exported. This external financing is also crucial for the central bank to maintain a stable supply of foreign exchange and stabilize the national currency, the cedi.
Typically, Cocobod conducts an investor roadshow between June and July, finalizing the syndicated facility in September before the commencement of the new harvest in October. However, this year, the loan is anticipated to be signed at the end of the month, involving eight participating banks, including Coöperatieve Rabobank UA as the lead arranger, along with Standard Chartered Plc and Societe Generale SA.
The loan amount is the lowest in at least 16 years, reflecting challenges faced by Cocobod in raising funding and falling short of the $1.2 billion required to purchase beans from growers in the current season. Consequently, Cocobod has arranged to borrow $400 million from cocoa traders such as Olam Group Ltd. and Barry Callebaut AG to bridge the gap.
Additionally, the board plans to leverage higher cocoa prices this year by selling on the spot market to fulfill its liquidity needs, according to the sources. Spokespeople for Coöperatieve Rabobank UA, Standard Chartered Plc, and Societe Generale SA declined to comment, and Fiifi Boafo, a spokesperson at Ghana Cocoa Board, also refrained from providing comments when contacted by phone.