The Bank of Ghana has welcomed the Ghana Cocoa Board’s decision to move away from its traditional syndicated loan model, saying the shift to domestic market financing will create a more sustainable system for funding cocoa purchases.
Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, said COCOBOD’s decision to raise funds locally through the capital market would reduce its reliance on commercial banks and ease pressure on the central bank’s balance sheet.
Speaking after the Monetary Policy Committee meeting, Dr Asiama said the new approach would allow COCOBOD to mobilise funds within the domestic financial system to purchase cocoa for export.
He described the move as a reform that should have been implemented earlier, noting that commercial banks faced limits on the amount they could lend to COCOBOD because of regulatory capital requirements.
According to him, the use of commercial paper and other capital market instruments would provide COCOBOD with an alternative source of financing while reducing the concentration of lending risks within the banking sector.
Dr Asiama said the previous pre-financing arrangement also resulted in significant liquidity injections into the economy, particularly during the cocoa purchasing season.
He explained that the new model would reduce the need for such large liquidity injections because the funds would be mobilised from within the financial system.
The Governor said the change was therefore consistent with broader efforts to strengthen Ghana’s financial system and improve the sustainability of cocoa financing.
COCOBOD recently announced that it would no longer depend on its annual syndicated loan to finance cocoa purchases, opting instead to raise funds from the domestic market.
Dr Asiama said the Bank of Ghana expected the new financing framework to support the continued financing of cocoa purchases while reducing pressure on both the central bank and commercial banks.
He added that the reform could contribute to a more efficient and sustainable financing structure for Ghana’s cocoa sector in the years ahead.
