The International Monetary Fund (IMF) and World Bank have disclosed that they are working together to accelerate debt restructuring for Ghana and other countries under the Group of Twenty (G20) Common Framework.
Leading the discussion, Ms Kristalina Georgieva, Managing Director, IMF said the IMF and the World Bank are bringing all relevant creditors and debtors together with promising signs. She explained that the two global financial institutions are doing so because the progress of the Common Framework on delivering on debt restructurings has been slow.
Meanwhile, the move is one of the supporting-pillars of the two-thronged “no regrets” actions for the next fifty years, captured in the Marrakech Principles, aimed at closing the divergent global income gap and generate job-rich growth for all.
The two policy actions are – investment in strong economic foundations, and investment in global cooperation. More than half of low-income countries remained in or were at risk of debt distress, with about half of emerging economies facing default-like debt spreads. This, Ms Georgieva, said requires prompt delivery of debt treatment, which would be beneficial to both creditors and debtors.
On the Fund’s support beyond pushing for speedy debt negotiations, the IMF Director noted that about US$1 trillion in liquidity and financing had been provided to countries across the world since the COVID-19 pandemic period.
“This came via the US$650bn Special Drawing Right (SDR) and US$320bn in lending to 96 countries, including 56 low-income nations. Our meetings here in Marrakech, the Red, leave me in no doubt that, together, we will unlock the door to opportunities for the next generation,” the IMF Managing Director said.
Debt Increases Throughout Emerging Markets
Mr Banga, the World Bank President also echoed similar sentiment, noting that debt has increased throughout emerging markets, doubling in Africa and shackling countries to the ground just as they’re trying to rise.
Mr Banga stated that it has become important to reimagine partnerships and have innovative plans to address the debt and other economic and climate change challenges for a liveable planet. “We took our first steps on this journey in April, squeezing US$40bn over 10 years from our balance sheet by adjusting our loan to equity ratio,” the World Bank President said.
The World Bank added that the Bank had also created a portfolio guarantee mechanism, together with the launch of a hybrid capital instrument to enable it take risks and boost its lending capacity, the more. “Taken together, we could provide US$157bn more in lending over a decade,” Mr Banga said.
Meanwhile, immediate steps have been taken to lessen the debt burden of low-income countries after the COVID-19 pandemic, where countries called on the IMF and World Bank to lend their support to the Debt Service Suspension Initiative (DSSI). This was after a decision by G20 Finance Ministers and Central Bank Governors’ meeting to endorse the suspension of debt service of most vulnerable countries under the Group.
Moreover, further action was taken later on in 2020 by the G20 Finance Ministers in endorsing the Common Framework for Debt Treatment beyond the DSSI to facilitate the timely and orderly debt treatment for DSSI-eligible countries.
Since then, Ghana, Chad, Ethiopia, and Zambia have requested for debt restructuring, and are at various stages of deals with Official Creditors.
Ghana, for example, looks forward to signing a pact with external creditors for a second tranche of US$600m from IMF, whereas Zambia also reached an agreement on Saturday, October 14, 2023, and awaiting official signing of agreement.