Dr Ernest Addison, the Governor of the Bank of Ghana has told the World Bank/IMF Meetings in Marrakech, Morocco during the IMF-African Caucus Meeting that there is the need to revamp the G20 Common Framework (CF) to ensure timely, orderly, equitable, inclusive, and transparent debt restructuring for distressed members in the region (including, Ghana, Ethiopia, and Malawi).

In this regard, Dr Addison called for a carefully-designed debt resolution mechanism, especially, for vulnerable members with large-domestic creditors (as in the case of Ghana) to help avert domestic financial market instability.

“I appreciate the opportunity today to speak on behalf of my fellow Governors about making public debt useful for sustainable growth in Africa. But let me first express my deepest commiserations to the authorities and the peoples of Morocco and Libya for the recent devastating tragedies that have claimed many lives, displaced many people, and destroyed properties, while appealing for urgent support from the international community.”
Dr Ernest Addison

Addressing the caucus, Dr Addison noted that African economies are faced with acute debt challenges underscored by rising social and infrastructural needs, amid spillovers from the Covid-19 pandemic, the war in Ukraine, tightening of global financing conditions, and climate-related disasters.

The governor asserted that public debt in sub-Saharan Africa (SSA) has now reached levels last seen in the early 2000s. The resultant increased debt service burden, together with complex creditor composition, he said, has heightened risks to debt sustainability, to the extent that more than half of the SSA members are now in or at high risk of debt distress.

“Simultaneously, protracted high inflation has constricted the policy space, posing difficult policy trade-offs for many members in the region. This challenging environment has led to another year of moderated pace of economic recovery, as SSA growth is projected to further decelerate in 2023.

“While members remain committed to implementing relevant policies and reforms towards enhancing fiscal discipline with the aim of restoring debt sustainability and fostering inclusive and sustainable growth in the continent, a much stronger IMF support would be crucial, amid the current challenging global environment.”
Dr Ernest Addison

Suggestions for Fragmented Global Financial Architecture

Against this backdrop, Dr Addison suggested that given the fragmented global financial architecture, “we urge the IMF to remain steadfast and adapt its lending toolkits to changing global conditions to serve its vulnerable membership better”.

“In this context, we restate our earlier request for increased concessional financing by aligning PRGT access thresholds with those of the GRA to ensure uniformity of treatment. In addition, we call on the Fund to relax the PRGT eligibility criteria to foster access to adequate Fund support while reducing, suspending, or eliminating entirely surcharges for most vulnerable PRGT-eligible members facing acute debt challenges.”
Dr Ernest Addison

Addison further also iterated his call for additional pledges from willing donors to close the gaps in PRGT resources. “We further stress the criticality of a successful completion of the ongoing 16th GRQ to reinforce IMF finances while protecting the quota share of the vulnerable members”.

The governor called for strengthening multilateral coordination and efficiency of regulatory framework for debt resolution in LICs, through a formidable Global Sovereign Debt Roundtable (GSDR), noting that such a move is paramount.

“While welcoming the latest developments on Zambia and Chad, we underscore the need to revamp the G20 Common Framework (CF) to ensure timely, orderly, equitable, inclusive, and transparent debt restructuring for distressed members in the region (including, Ghana, Ethiopia, and Malawi). In this regard, we call for a carefully designed debt resolution mechanism, especially, for vulnerable members with large-domestic creditors (as in the case of Ghana) to help avert domestic financial market instability.”
Dr Ernest Addison

Finally, Dr Addison noted that deepening the Fund’s tailored capacity development and surveillance support, in collaboration with other international partners, is crucial to addressing member-specific bottlenecks for restoring public debt sustainability, and bolstering inclusive and sustainable economic growth and development in the region.