Government advancing debt restructuring efforts – Finance Minister

In a comprehensive update on Ghana’s debt restructuring programme, Finance Minister Dr. Mohammed Amin Adam has highlighted the government’s ongoing efforts to restore fiscal sustainability and foster economic recovery.

Speaking at a press briefing, the Minister emphasised the significance of upcoming discussions with bondholder representatives to advance restructuring engagements.

“In the coming weeks, government and our advisors will start extensive discussions with bondholder representatives to advance restructuring engagements following agreement with the Official Creditors’ Committee( OCC),” he announced. “Ultimately, the engagements with Ghana’s commercial creditors, including bondholders, are expected to ensure that Ghana achieves the targets set under the IMF/World Bank Debt Sustainability Framework.”

Recalling the commencement of Ghana’s debt restructuring initiative in December 2022, Dr. Amin Adam outlined the phased approach adopted by the government to tackle the complex task. The Debt and Debt Exchange Programme (DDEP) saw significant success in its initial phase, providing relief through reduced coupon rates and extended maturities.

“The first phase of the DDEP provided significant relief, with the average coupon rate reduced from 19.1 percent to 9.1 percent and the average maturity increased from 3.8 years to 8.3 years,” he explained.

Subsequent phases of restructuring targeted various financial instruments, including locally issued bonds, corporate bills and pension fund holdings. Notably, non-marketable holdings by the Bank of Ghana underwent restructuring measures, reflecting the government’s commitment to stabilising the financial sector.

As part of structural measures under the IMF-supported programme, progress has been made in operationalising the Ghana Financial Stability Fund (GFSF). Dr. Amin Adam highlighted the fund’s role in mitigating the potential impact of government debt operations on the financial sector, particularly in protecting state-owned banks and indigenous financial institutions.

“The government is also committed to addressing the remaining legacy problems in the financial sector,” he assured. “We will announce measures to gradually complete the fiscal support provided to some clients of failed asset management.”

Acknowledging the impact of restructuring efforts on the banking sector, the minister referenced the Bank of Ghana’s assessment of improved profitability and strength entering 2024. He emphasised the government’s commitment to ensuring the sector’s resilience amid ongoing reforms.

Turning to external debt restructuring, Dr. Amin Adam highlighted significant progress, including formal requests under the G20 Common Framework and agreements with bilateral creditors through the Official Creditor Committee (OCC). The recent agreement with official creditors marks a crucial step toward long-term debt sustainability aligned with IMF targets.

“The final step involves the restructuring of our commercial debt, particularly our Eurobonds,” he stated. “Government has received counter-proposals on the debt treatment scenarios from the two bondholder groups.”

Dr. Amin Adam also provided insight into the upcoming IMF review of Ghana’s Post Covid-19 Programme for Economic Growth (PC-PEG). Scheduled for April 2024, the review will assess Ghana’s performance against programme objectives and targets, with potential disbursements expected upon approval by the IMF Executive Board.

“The Ministry of Finance is working with the Bank of Ghana in preparation for the IMF 2nd Review Mission,” he revealed. “Preliminary assessments indicate that we are on track to meet most of the targets under the Programme.”

The minister reaffirmed the government’s commitment to navigating Ghana’s economic challenges and ensuring sustainable growth and development.