Cocoa syndicated loan was already flawed and unnecessary – IEA’s Kwakye

The Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye has welcomed the decision of the Ghana Cocoa Board (COCOBOD) to wean itself off syndicated loans.

To him, the syndicated loan idea was flawed, a situation that required thinking outside the box to fund cocoa purchases.

His comments come at a time when the Chief Executive Officer of COCOBOD, Joseph Boahen Aidoo announced that, for the first time in three decades, the organization would not secure offshore syndicated loans to finance the purchase of cocoa beans for the 2024/2025 crop season.

Targeting the purchase of around 650,000 metric tonnes of cocoa beans, COCOBOD stated that it plans to finance the procurement entirely from its internal operations.

He told a media briefing that the Board had decided to finance the purchases domestically.

“Within two years, we’ve learned our lessons, and we think that it’s high time, we wean ourselves from the offshore international financial markets and finance the crop ourselves here. And that’s exactly what we are going to do,” he said.

“The money will come locally; we are going to be self-financing. We have a clear idea of what we are going to do, how much we need and where the money will come from,” he added.

The board also lowered its target for the season to 650,000 tonnes from 810,000 tonnes.

Cocobod had planned to raise 1.5 billion dollars from the international market for the season.

However, Mr Aidoo said that would not happen, considering the almost 150 million dollars in interest payments last year.

“Look at interest rates last year which were over eight percent. It means that we can save more than 150 million dollars by just not going. The decision not to go offshore alone can save us all that money.

In a post on his X platform reacting to this, Dr Kwakye said “The syndicated loan was already flawed and unnecessary. Let’s think outside the box. Let Bank of Ghana fund cocoa purchases at a moderate interest rate and be reimbursed with the cocoa FX proceeds.”

He added “We should think outside the box. Why don’t we ask Bank of Ghana to provide money to Cocobod for cocoa purchases? The Bank will charge a moderate interest rate. It will finally receive payment from proceeds from the cocoa when it is sold.”