Experts: Reform Laws to Better Govern Resource-Backed Loans
The experts laid out pitfalls like disregard for procurement regulations, limited public scrutiny, poor loan terms favouring financiers and misuse of funds.
ACCRA, Ghana— African countries should reform legal frameworks to explicitly regulate resource-backed loans (RBLs) which leverage natural resources to finance development, according to experts speaking Thursday at a conference examining the complex financing model, writes Winston Mwale.
RBLs allow nations to pledge future mining or oil earnings as collateral for infrastructure projects.
But researchers Cornelius Dube and Evangelista Mudzonga said while the loans aren't currently illegal in most countries studied, "their contribution to total debt level should not remain a secret."
Dube said fairly common non-disclosure makes such deals "illegal in terms of practice," flouting public finance rules requiring transparency.
Mudzonga added the lack of RBL governance means "the failure to explicitly mention RBLs (results in) inadequacies to ensure that RBLs are properly structured."
The presentation explored RBL case studies in South Sudan, Chad and Ghana where oil or minerals were leveraged for borrowed funds.
The experts laid out pitfalls like disregard for procurement regulations, limited public scrutiny, poor loan terms favouring financiers and misuse of funds.
“Reform the legal framework so that it specifically provides for RBLs management in their debt management regimes," the two experts recommended to officials from across Africa attending the RBL conference.
*Download the presentation below.
