Ghana is poised to secure approval from the International Monetary Fund’s board as she takes a big step towards restructuring its $58 billion-worth of debt this week, with its bilateral creditors meeting to discuss whether to provide enough relief to unlock a $3 billion IMF bailout.
According to Financial experts who prefer to remain anonymous, financing assurances from bilateral creditors, who plan to form an official committee today, Tuesday, April 11, 20223, remain the last hurdle for the West African nation before it approaches the IMF Board.
Ghana, which is restructuring most of its public debt, is yet to complete negotiations to reorganize about $13 billion of eurobonds after the government unilaterally suspended payments on most of its external obligations in December.
The private creditors face a risk of losing as much as 30% on the principal and may be asked to forfeit some interest payments, Deputy Minister of Finance John Kumah said in November.
The bilateral creditor committee, as stated by the experts, is expected to have its first meeting within a week of its formation with Ghana now targeting an agreement by the end of April.
“For Zambia, it took creditors six weeks to provide financing assurances. The IMF board approved the southern African nation’s program a month later.”
The Financial Experts
Steps Taken By Ghana To Secure A Bailout
Ghana owes $5.5 billion to foreign governments and their state banks. Ken Ofori-Atta, Finance Minister, said he had “hope” those bilateral creditors would consent to enough debt relief to enable the country to tap an IMF loan package agreed last year.
“We hope on April 11, 2023, the Paris Club will meet with China present to provide financing assurances to the IMF. This will be the defining input that the IMF will require to then go to their board.”
Mr. Ken Ofori Atta
The French Treasury, which hosts the Paris Club of bilateral creditors, said the group was “doing everything” to reach an agreement on the commitments required.
China, which is owed $1.9 billion, is expected by Mr. Ofori-Atta to agree to a deal, despite not being a member of the Paris Club.
Ghana stopped repaying most of its debts in December 2022, and reached a preliminary deal with the International Monetary Fund (IMF) on a rescue package in the same month.
But the IMF’s support is dependent on Ghana meeting a string of conditions, including measures to raise revenues through a rise in the rate of value added tax, tariff increases on public utilities and an end to Central Bank finance for the government.
The fund also asked Ghana to make progress on restructuring its domestic debts.
Mr. Ofori-Atta said the fund’s conditions had been met. “Those are literally all done, so we are pretty much there. We have done what is required,” he said.
Ghana’s restructuring talks are being closely watched by other low and middle-income countries who are in, or at risk of default.
A breakthrough in Ghana’s debt talks could raise hopes of faster workouts in the restructuring of other countries’ debts in the future.
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