Ghana Cocoa Body to Sell $556 Million of Debt, End Subsidies

Updated on
  • Cocoa regulator will sell debt through bills and bonds
  • Producer pay will be pegged to global prices from October

Ghana’s cocoa regulator will sell as much as 2.5 billion cedis ($556 million) of debt to pay for liabilities and operational costs while pledging to end subsidies for farmers, according to a deputy finance minister.

The debt sale will follow after Ghana Cocoa Board opted to prop up farmer pay with 984 million cedis in the current season, incurred losses of at least 110 million cedis during the previous crop and had to deal with legacy debts from an administration that was replaced last year. The pledge to end subsidies signal a policy shift after the world’s second-biggest cocoa grower ruled out changing producer payments since setting the minimum price at 7,600 cedis per ton in October 2016.

Over the same period, futures contracts in London slumped by more than a third on forecasts of a second consecutive bumper crop in Ghana and neighboring Ivory Coast, the world’s largest cocoa producers.

Ghana’s cocoa board will sell the debt through bills and longer dated local-currency bonds to meet its obligations for the season through September, Deputy Finance Minister Charles Adu Boahen said Tuesday in an interview in the capital, Accra. The regulator will pay farmers the equivalent of 70 percent of the freight-on-board price for cocoa from the beginning of the new season in October and will begin a campaign to explain to producers why payments need to correspond with international trends, he said.

Viable Entity

“We believe that from next season, when there is no subsidy, the board will make sufficient revenue to pay off its debts,” said Boahen, who also serves as chairman of the regulator’s finance committee. “The cocoa board is a very viable commercial entity.”

A cocoa debt auction may take place this week as Ghana already used about $1.25 billion of a $1.3 billion syndicated loan that it obtained for farmer payments from foreign and local banks in September, Boahen said. The regulator is targeting a harvest of 850,000 tons this season, of which about 435,000 tons were purchased by Dec. 28, according to people familiar with the matter.

Ghana regularly sells 182-day cocoa bills to shore up its finances. It sold 580.2 million cedis in notes earlier this month at a yield of 20.07 percent.

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