Prf. John Gatsi
An economist and lecturer at the University of Cape Coast, Prof. John Gatsi has maintained that the transaction between the government of Ghana and China cannot be called “Barter” but a loan with is a debt Ghana has to repay.
[ads1]According to him, “Barter trade is the most basic form of trade transactions. After all, when debt is utilized according to a progressive development plan taking into consideration the overall long-term interest of the country, then debt is considered to be good”
“So why should the government be avoiding the word debt and the minority seeking clarification as to whether the barter transaction is debt?” he quizzed
Prof. Gatsi explained that “The public debt of Ghana shall be charged on public funds. Bauxite revenue is a public fund. Also China is exchanging her $2billion for a repayment using the sale of refined bauxite and the money disbursed from a dedicated Account. So, in reality, Ghana will repay the $2billion from the sale of bauxite for which the dedicated account disburses to China over a period of time”
“Technically, this is not bartering but collateralization of bauxite revenue. This barter transaction is a loan” He insists
Read the full discussion with Prof. Gatsi:
My Discussion with Prof. John Gatsi on Why the Ghana-China Barter transaction is a debt
Barter trade is the most basic form of trade transactions. After all, when debt is utilized according to a progressive development plan taking into consideration the overall long-term interest of the country, then debt is considered to be good. So why should the government be avoiding the word debt and the minority seeking clarification as to whether the barter transaction is debt?.
The answer to the above is simple. The government while in opposition opposed debt and promised not to borrow. The government while in opposition created a mountain out of Debt to GDP ratio forgetting that most developed economies are managing more than 105% Debt to GDP ratios. Maybe the opposition wants the government to be aware that the promises about debt are not being kept.
Why is the barter transaction a liability obligation to government and as a result a debt?
The public debt of Ghana shall be charged on public funds. Bauxite revenue is a public fund. Also China is exchanging her $2billion for a repayment using the sale of refined bauxite and the money disbursed from a dedicated Account. So, in reality, Ghana will repay the $2billion from the sale of bauxite for which the dedicated account disburses to China over a period of time.
Technically, this is not bartering but collateralization of bauxite revenue.
The question is not whether it is debt or not but what percentage of bauxite revenue should be allowed for the collateralization. Another question is to what extent should China be an off taker of our bauxite given that China is the creditor and most companies in the bauxite value chains will come from China?
Furthermore, to what extent are we guided by prohibitions and guidelines of collateralization in section 5 of the Petroleum Revenue Management Act (PRMA) though it does not regulate bauxite revenue.
This barter transaction is a loan. The repayment will be from bauxite revenue which is public fund. A loan includes any money lent or given for which there is condition for repayment and such repayment is from public fund or any fund whatever the name so long as the purpose of the fund is to repay the loan or the money given.
Article 181(6) (a)(b) provides a very clear understanding of what a loan is to the republic. All the pointers to what a loan is to the Republic are clearly and comprehensively outlined.
Thus, there is no doubt that this transaction is a debt and creates a creditor-debtor relationship between China and Ghana.
Acceptance by the government that this is a debt and thereafter focus on the assets to be created and adherence to basic principles of natural resources collateralization, may be fair and acceptable
