Ghana has abandoned its 32-year tradition of securing loans from international banks to finance its cocoa crop for the upcoming season.
Industry regulator Ghana Cocoa Board “wants to wean itself” from the annual syndicated loans, Chief Executive Officer Joseph Boahen Aidoo said.
Typically, Cocobod secures the syndicated loan in September, right before the season kicks off.
Ghana plans to tap domestic sources to finance cocoa purchases from farmers in the upcoming season, which begins a month earlier this year on Sept. 1, Bloomberg reported.
The decision follows a Bloomberg report revealing that the world’s second-largest cocoa producer had been negotiating a bridge loan with major cocoa traders like Barry Callebaut AG and Olam Group Ltd. after talks with foreign lenders for a $1.5 billion syndicated loan stalled.
Ghana’s cocoa board typically secures a minimum of $1 billion annually to finance seedlings, chemicals, fertilizers, and bean purchases from farmers. However, due to the country’s debt restructuring and a decline in cocoa production, it could only borrow $600 million last year, diminishing its credit attractiveness.
For the 2024-25 season, Ghana has reduced its cocoa harvest target by 20% to 650,000 tons due to weather-related concerns, according to Aidoo.
Unfavourable weather, disease, and a shortage of fertilizers have hurt bean harvests in Ghana. The country’s production fell from 683,000 tons in 2021-22 to 654,000 tons in 2022-23, with a projected decline to 501,000 tons by September’s end, according to International Cocoa Organization data. This scarcity has driven cocoa futures prices to surpass $11,000 per ton earlier this year for the first time.
Without foreign cocoa funding, the Bank of Ghana will now rely on revenue generated from the gradual sale of cocoa beans to build its foreign reserves, rather than the bulk sum it traditionally receives each October when the harvest begins.
This shift could have significant implications for the central bank, which has historically used the substantial foreign exchange influx from cocoa sales to manage exchange rate volatility.
“Whatever cocoa we sell is sold in dollars and so the revenue from our cocoa will be paid in dollars,” Aidoo said. “Our forward contracts will all be paid for in dollars when we deliver the cocoa so the dollars will come in to shore up the cedi.”
