The Ministry Of Finance (MoF) has demanded for the suspension of payments on selected external debts of the Government of Ghana.

According to a statement released by the Public Relations Unit of the Ministry of Finance, Ghana is currently faced with major economic and financial crisis and its attendant social challenges, hence, a need for a halt in the payment on selected External Debts of the government.

In 2020 and 2021, the Covid-19 pandemic negatively impacted the nation’s fiscal and economic situation. Global risk aversion triggered large capital outflows, a loss of external market access and rising domestic borrowing costs.

MoF further declared that, the 2022 global economic shock induced by the Russian invasion of Ukraine has adversely affected the economy just when it was beginning to recover from the pandemic.

The combination of adverse external shocks has exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget. These factors taken together have put the sustainability of the debt at risk, MoF stated.

“To address these mounting challenges, we launched on Monday 5th December an invitation to exchange our domestic debt. The details of this domestic debt exchange are set forth in an Exchange Memorandum, available on https://mofep.gov.gh/news-and-events/debt-operations. This domestic debt operation is part of a more comprehensive agenda to restore public debt sustainability.
“Given the magnitude of the economic and social crisis that Ghana is confronted with, this domestic debt operation will not be enough to close the large financing gaps that Ghana faces over the coming years. The Government’s Debt Sustainability Analysis (DSA) has demonstrated that our public debt, both external and domestic, is unsustainable.”
Ministry Of Finance

MoF cited its formal request for International Monetary Fund (IMF) assistance in July 2022. According to them, a Staff-Level Agreement (SLA) from its request was subsequently achieved and announced on the 13th December, 2022.

The IMF assistance financing program was aimed at restoring macroeconomic stability and debt sustainability, and preserving financial stability while protecting the most vulnerable.

“This SLA milestone was achieved in record time. It is with this same spirit that we, therefore, expect creditors to also respond in an expedited manner to ensure that, the IMF-supported programme is adopted by the IMF Board as soon as possible in early 2023.”
Ministry Of Finance

Suspension Of Payments Is A Measure To Avoid Future Economic Turmoil

MoF made mention of additional emergency measures that are necessary to prevent a further deterioration in the economic, financial, and social situation in Ghana. “As it stands, our financial resources, including the Bank of Ghana’s international reserves, are limited and need to be preserved at this critical juncture,” it indicated.

“That is why we are announcing today a suspension of all debt service payments under certain categories of our external debt, pending an orderly restructuring of the affected obligations. This suspension will include the payments on: our Eurobonds; our commercial term loans; and on most of our bilateral debt.
“This suspension will not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022 or debts related to certain short term trade facilities. 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.”
Ministry Of Finance

MoF in the conclusion of its press release communicated that, Government stands ready to engage in discussions with all of its external creditors to make Ghana’s debt sustainable through a fair, transparent and comprehensive debt restructuring exercise in line with international best practices.

The Ministry of Finance will hold an investor presentation at a date to be announced at a later stage, MoF stated