According to Professor John Gatsi, the Government of Ghana cannot employ the same strategy used with domestic bondholders to gain approval from external creditors for its debt restructuring.

The government is aiming for the release of the second tranche of the $3 billion funds from the International Monetary Fund (IMF). Ghana failed to meet the November 1 deadline outlined in the IMF program for the second tranche of the $3 billion bailout package. Presently, the country is engaged in negotiations with external creditors for debt relief totaling $10.5 billion.

The Finance Minister has already presented proposals to commercial creditors, requesting a potential 40% haircut and additional debt adjustments with bilateral creditors such as China and the Paris Club.

“The delay is occasioned by the inability of the government of Ghana and the creditors to agree on what is required of them. The Government of Ghana is pleading with the creditors to accept the certain elongation of maturity of the debts and some cuts, about 30 to 40 percent on the interest or the coupons that they expect.
“That is where the disagreement is coming from. As things are it seems part of the creditors such as bilateral and multilateral are sort of very soft but it was also indicated that some creditors are excused from the debt exchange programs they will not be affected.”
Prof. John Gatsi

He believes that there is an unsettling issue causing the delay of investors agreeing.

“It is very difficult for commercial creditors to see a chunk of the interest wiped away, I believe that is where the disagreement is and they have not come to terms with it yet. That is why we couldn’t meet the target. If the terms proposed by the government are acceptable to the creditors then that would have been a done deal but since there are no common grounds they need to negotiate their way through.
“The creditors see that you have attracted them with a certain level of environment, they agreed to give their money, they expect us to pay, we have been paying then all of a sudden we have stopped paying. We need to explain to them for them to be convinced whether what we are asking for should be given or not. The government of Ghana has not been able to convince them.”
Prof. John Gatsi

He also added that one thing the country needs to bear in mind is that external credit agreement on debt restructuring is not the same as debt restructuring in the domestic setting where the government can use all kinds of tactics and strategies to get the investor stakeholders to agree to the position of the government, that is not the same.

“If you do that, you will crash”, he stressed.

Ghana Missed November 1 Timeline

Ghana received the first tranche of $600million in May this year. The cash, according to the Ministry, was to help restore macroeconomic stability, sustain the country’s debts, and lay a strong foundation for inclusive growth.

“The first tranche of $600million of Ghana’s low interest of $3billion Extended Credit Facility has been received to help restore macroeconomic stability, sustain the country’s debts and lay a strong foundation for inclusive growth.”
Finance Ministry

Earlier, a statement from the Paris Club indicated that Ghana has gained the support of the Paris Club, in addition to China in the country’s request for support from the International Monetary Fund (IMF).

The creditor committee made up of countries with eligible debt claims on Ghana, is now formally established. The creditor committee is expected to be co-chaired by China and France.

The creditor committee, meanwhile, expressed satisfaction with the country’s macroeconomics fundamentals.

However, Ghana missed out on the November 1 timeline set in the IMF program for the second tranche of the $3 billion bailout facility. The country is currently discussing with its external creditors for debt relief worth $10.5 billion.