October 25, 2010 / 8:15 AM / in 7 years

IMF says Ghana's $13 bln Chinese loan 'good'

NAIROBI (Reuters) - A $13 billion Chinese loan to Ghana is good for the African country and does not contravene any agreements with the International Monetary Fund (IMF), a senior IMF adviser told Reuters on Monday.

<p>A bank employee poses holding U.S. one hundred dollar notes during a photo opportunity at a bank in Seoul November 19, 2009. REUTERS/Choi Bu-Seok</p>

Roger Nord, a senior adviser to the IMF’s African department, also said the continent would become the recipient of massive capital flows and challenges would include using the funds productively and managing currency and interest rate volatility.

Ghana’s loan deal, signed during a visit by President John Atta Mills to China, involves $3 billion from the Chinese Development Bank to finance Ghana’s oil and gas infrastructure and agricultural development.

A second deal for $9.87 billion was signed with Chinese Exim Bank for road, railway and dam works.

“Investment from China is a big opportunity for sub-Saharan Africa. It is a good thing,” Nord told Reuters.

“Of course as with all such deals, they involve potentially debts that need to be repaid so you need to make sure that this debt is productive, and the investment will generate economic return to repay the debt. The challenge now for Ghana and other African countries is to use these resources wisely.”

He said the agreement did not go against any agreement the IMF has with Ghana.

“The Ghanaian programme has particular objectives in terms of getting both fiscal deficits and debt under control and provided those benchmarks are met, I think Ghana will be on the right track, but it is precisely there that the challenge lies.”

Nord was speaking in Nairobi, on the sidelines of an event to launch of the Regional Economic Outlook for sub-Sahara Africa.

“What has served African countries well are flexible currencies that adjust to economic circumstances. What you see when you are faced with capital inflows is that currencies tend to strengthen ... and that is a good thing, it reflects good productivity ...,” he said.

Sub-Saharan African economies have been growing faster than most of the rest of the world, and the IMF projects they will expand by an average 5.0 percent this year and 5.5 percent in 2011.

The fund projects global economic growth of 4.8 percent in 2010.

Ghana, which is expected to start producing 120,000 barrels of oil per day by the end of this year, is expected to grow its GDP by 5.0 percent in 2010 and 9.9 percent in the following year, according to the IMF.

“Africa is at a point where it can become one of the fastest growing areas in the world, and that is an opportunity to be seized, not wasted,” said Nord.

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