Ghana’s cocoa regulator, COCOBOD, will sell as much as GH₵2.5 billion ($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 GH₵984 million in the current season, incurred losses of at least GH₵110 million 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 GH₵7,600 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 neighbouring 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.
“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 GHc580.2 million in notes earlier this month at a yield of 20.07 percent.