Ghana has decided to break a 32-year tradition by moving away from borrowing from international banks to fund its cocoa crop for the upcoming cocoa season. The Ghana Cocoa Board, which has long relied on these annual syndicated loans, will now seek funding from domestic sources for the new season, starting earlier this year on September 1.
Traditionally, the board raises at least $1 billion annually to cover expenses for seedlings, chemicals, fertilizers, and to buy cocoa beans from farmers. However, last year, due to Ghana’s debt restructuring and decreased output, it could only secure $600 million. This shortfall has led to a significant reduction in the harvest target for 2024-25, which has been cut by 20% to 650,000 tons, largely due to adverse weather, diseases, and a shortage of fertilizers. The combined effects have pushed cocoa futures prices above $11,000 per ton for the first time.
Joseph Boahen Aidoo, CEO of the Ghana Cocoa Board, announced this shift during a press briefing in Accra on Tuesday. The decision comes in the wake of stalled negotiations with foreign lenders for a $1.5 billion syndicated loan, as reported by Bloomberg. The board had initially hoped to secure this substantial sum to finance cocoa purchases, but discussions faltered, leading them to explore alternative funding options.
With the end of foreign cocoa funding, the Bank of Ghana will now need to rely on revenue from cocoa sales to build its foreign reserves, rather than receiving a substantial upfront amount each October. This change in approach means the central bank will need to manage exchange rate volatility differently.
Aidoo emphasized that all cocoa sales will now be conducted in dollars. “Revenue from our cocoa will be in dollars,” he said. “Our forward contracts will also be paid in dollars upon delivery, which will help strengthen the cedi.”
Like, comment in the box below, and share on all our social media platforms. For more updates on international news, local news, business, elections, sports, and exciting discussions, tune in to Orange FM 1079.
