Resource-Backed Loans in Africa Under Scrutiny at Upcoming Ghana Financial Forum
A key goal outlined by organizers is producing a policy paper to reform RBLs in Africa, which have contributed to rising debt burdens in recent years.
ACCRA, Ghana – Government officials, economists, and policy experts from across Africa are set to gather in Ghana's capital city on Thursday, November 23, 2023, for a conference examining the complex issues surrounding resource-backed loans (RBLs) and their impacts on African countries, writes Winston Mwale.
The daylong event, "Tax Regimes in the Age of Resource-Backed Loans and Collateralization," will bring together stakeholders to promote responsible financial management by formulating recommendations to address RBL challenges.
A key goal outlined by organizers is producing a policy paper to reform RBLs in Africa, which have contributed to rising debt burdens in recent years.
RBLs allow countries to use future revenue from natural resources like oil, minerals, and agricultural products as collateral to secure financing for development projects.
However, fluctuating commodity prices have caused debt crises when countries cannot make loan payments.
"Contracting future revenues from natural resource exports as loan repayment is a way both for borrowers to attract finance and for lenders to mitigate risks," the concept note stated.
"However, this lending modality can pose problems when commodity prices fluctuate."
The conference is expected to highlight findings from a recent study showing how countries like Angola, the Democratic Republic of Congo, Ghana, and Sudan have leveraged oil, copper, cocoa, and other exports to secure Chinese loans, only to later face distress when prices collapsed unexpectedly.
Sessions throughout the day will explore regional protocols on debt sustainability, integration of RBLs into diverse African public finance regimes, and real-world case studies examining RBL successes as well as pitfalls across the continent.
Presenters will assess the vital role of regional economic convergence pacts in times of crises and how they relate to RBLs.
Other discussions will analyze the extent RBLs are integrated into the budget and planning processes of individual countries.
Additional goals are formulating policy recommendations to address RBL challenges in a sustainable way and producing a regional analytic briefing paper to serve as an advocacy tool for reforming RBL frameworks.
"The session seeks to highlight findings and obtain feedback in relation to the objectives set out below," the concept note said.
Among the desired outcomes outlined are lessons from past RBL efforts, practical reforms for the future, and a consolidated document for driving change.
The Accra forum will underscore how natural resources present opportunities for economic growth if leveraged responsibly but can risk instability if not managed prudently.
Attendees are expected to emphasize that good governance, transparency, local engagement, and financial protections are imperative when countries collateralize commodities to access financing for roads, energy, telecoms, and other critical infrastructure.
They will discuss balancing the interests of investors providing loans with the needs of communities impacted by extraction projects that RBLs fund.
Many will highlight the importance of binding contracts stipulating how profits are invested back into marginalized areas.
The group will explore creating consistent standards and improved coordination between regional bodies and national regulators overseeing RBLs and natural resource governance.
Several panellists will argue for stronger financial buffers to hedge against price fluctuations.
If designed equitably, monitored diligently, and governed transparently, resource-backed lending can unleash Africa's economic potential, attendees will affirm.
However, additional safeguards and oversight are essential to avoid repeating past mistakes.