Ghana’s licensed cocoa buyers owe banks up to $750 million, according to their industry association, creating fresh liquidity pressures in the financial sector at a time when lenders are still recovering from the country’s worst economic crisis in a generation.
Ghana, the world’s second-largest cocoa producer, has recorded two straight weak harvests due to crop disease and poor weather.
At the same time, global cocoa prices have fallen sharply because of weak demand, leaving large volumes of unsold beans in Ghana and neighbouring Ivory Coast, which together produce about half of the world’s cocoa.
London cocoa futures dropped to near a three-year low on Tuesday, Reuters reported.
Samuel Adimado, president of the Licensed Cocoa Buyers Association of Ghana, said the debt burden has grown because Cocobod, the country’s cocoa regulator, has increased spending on non-core activities such as road construction.
As a result, buyers have relied on bank loans to prefinance cocoa purchases.
He told Reuters that buyers owe banks around 7 billion to 8 billion cedis ($650 million to $750 million), and an additional 2.2 billion to 2.5 billion cedis to farmers. “Interest keeps piling up,” he said.
Don’t Miss This:
Ghana Cocoa Farmers Protest Prices, Warn Of Smuggling To Neighbouring Countries
This month, the government introduced measures to stimulate demand, including reducing the fixed price it pays for cocoa beans and announcing plans for a cocoa financing scheme aimed at raising funds.
Buyers hope the scheme will provide much-needed liquidity. Adimado said cocoa buyers have delivered about 580,000 metric tons to Cocobod this season but are still waiting for payment, while another 70,000 metric tons remain in the fields.
The reduced producer price will apply to roughly 100,000 metric tons of cocoa. Cocobod has said it is working with the government to address its financial strain.
The Ghana Association of Banks confirmed that lenders are exposed to the growing debt in the cocoa sector.
Chief Executive Officer John Awuah declined to provide a total figure but said the rising debt has led to some loan restructurings and could result in losses.
Ghana’s banking system is still recovering from the government’s 2023 Domestic Debt Exchange Programme (DDEP), which restructured nearly all domestic bonds.
The move significantly weakened banks’ capital buffers, forced recapitalisations, and led to record losses.
Under the programme, Cocobod’s short-term cocoa bills, used to finance annual bean purchases, were converted into longer-term bonds with lower interest rates.
Awuah said the banking system appears resilient but needs careful management to remain compliant with Ghana’s programme with the International Monetary Fund.
Don’t Miss This:
Ghana’s Cocoa Farmers Unpaid As New System Strains Payments And Next Harvest At Risk
Image Credit: CNBC Africa
