Government inches closer to securing IMF programme

percent of eligible bondholders – a condition for the IMF deal, it is expected that the Fund’s Executive Board will approve the country’s bailout request by end of first-quarter 2023, with government having already obtained a government-secured staff-level agreement (SLA) three months ago.

Although the deal also hinges on a number of prior actions, key among which is the restructuring of public liabilities through the debt exchange programme – expected to be completed before the request can receive approval, successful closure of the DDEP paves way for government to expedite action toward reaching a full agreement with the Fund.

In addition to the DDEP, government is seeking to restructure its foreign debt and has initiated discussions with bilateral lenders to create an official creditor committee… which is the initial step required to begin negotiations on debt-relief.

If this step is not taken, approval of the IMF programme will be delayed; which could mean that the much-needed disbursements will be hindered.

As much as other countries undergoing the common debt restructuring framework treatment have faced slow progress, government is hopeful of a rapid debt overhaul.

“Ghana stands ready to complete all prior actions before end-March 2023; but more importantly, Ghana is committed to the IMF programme as a whole,” Finance Minister Ken Ofori-Atta said during the announcement of the SLA.

He added that: “We can only get to the IMF Board if we get sufficient commitment from our creditors in support of the debt operation”.

Two weeks ago, German Finance Minister Christian Wolfgang Lindner pledged unwavering support for the creditor committee’s establishment at the Paris Club for Ghana.

“I hope that an international creditors committee under the current framework can be formed soon. I would like to call on all creditors to join the efforts as swiftly as possible, and to be frank I remind China of its responsibilities as a very important bilateral creditor to Ghana – as I did already on the international level on occasion; for example, in the last IMF meeting,” the German Finance Minister said.

According to Reuters, the Paris Club of creditor nations has contacted other bilateral creditors, such as China and India, to engage in forming the committee.

Following Chad, Ethiopia and Zambia, Ghana is the fourth country to request a debt restructuring under the G20 Common Framework, which was established in 2020 to simplify the coordination of creditor governments in restructuring debts of low-income countries after the COVID-19 pandemic.

Data from the Institute of International Finance (IIF) suggest that China is Ghana’s single biggest bilateral creditor with US$1.7billion of debt, while the country owes US$1.9billion to Paris Club members. Chinese lending represents around 80 percent of non-Paris Club debt, as the nation’s total external debt is US$28.4billion.

Calling on all creditors, the German Finance Minister added that it is essential to see a fair sharing among all creditors, saying: “This is why we need the creditor committee as soon as possible, in which China has to participate”.

In December 2022, the main holders of Ghana’s foreign debt established a creditor consortium to negotiate debt restructuring with government after a surprise announcement about the suspension of interest payments on its external debt. Already, data from the financial market data aggregator, Refinitiv, show that Ghana’s dollar-denominated debt ranges from 2023 to 2061, totalling more than US$13billion.

The nation’s Debt Sustainability Analysis (DSA) demonstrates that debt servicing absorbs more than half of total government revenues and almost 70 percent of tax revenues. Additionally, the total public debt stock, including that of state-owned enterprises among others, exceeds 100 percent of the gross domestic product (GDP) and had accelerated to GH¢575.7billion at the end of November 2022, according to official data.

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