External debt payment suspension to help conserve foreign reserves – Government

Government has announced a suspension of debt service payments under certain categories of its external debt, pending an orderly restructuring as the country builds up to an Executive Board approval for a $3 billion bailout from the International Monetary Fund (IMF).

The suspension includes payment obligations on Eurobonds, commercial term loans, and most bilateral debt.

According to a statement issued by the Ministry of Finance on Monday, December 19, 2022, the move is part of a comprehensive debt sustainability programme by government to evaluate its debt portfolio and put in place appropriate measures that will help bring the country’s debt situation to sustainable levels with a debt to Gross Domestic Product (GDP) target of 55 per cent by 2028.

“We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors”, the statement explained.

This suspension, it is said in the statement will not include the payments of multilateral debt, new debts (whether multilateral or otherwise) contracted after December 19, 2022, or debts related to certain short term trade facilities.

The statement added that the government stands ready to engage in discussions with all of its external creditors through a fair, transparent and comprehensive debt restructuring exercise in line with international best practices.

Already, the announcement of the suspension is generating a high level of support from the investor community with some anonymous sources describing it as a “friendly match”, indicating that government should make it a point to share detailed economic and financial information throughout the process.

Meanwhile, government has also taken steps to restructure its domestic debt through an exchange programme. The programme, launched on December 5, 2022, is designed to offer relief to the country’s fiscal accounts through an exchange in coupon package on domestically issued bonds providing a solid foundation for Ghana to in the long-term downsize its debt and reboot the economy.

The finance minister, however, stated that so far, the announcement has in part helped the cedi stage a remarkable rebound against its major trading partners, as the demand for forex has significantly reduced, thereby helping the government to conserve its foreign reserves that have come under serious pressure in recent months.

Analysts expect that the suspension of external debt payments will help the cedi continue its upward trajectory against major trading currencies.