The proposed agreement, which involves the restructuring of $5.4 billion of debt owed to China and members of the Paris Club of creditor nations, is a crucial step to opening the path for the second disbursement of funds from a $3 billion International Monetary Fund (IMF) rescue loan to support Ghana’s economic recovery efforts.
Abebe Selassie, the Director of the IMF’s Africa department, expressed hope that the Executive Board would be in a position to approve the payment before the end of the year.
“Bilateral official debt is significant, but not the lion’s share of the debt challenge of Ghana,” Selassie told Reuters in an interview on the sidelines of the IMF and World Bank Annual Meetings in Marrakech, Morocco.
“Within this stock of obligations that Ghana has to bilateral creditors, the share to the Paris Club is fairly large So we’re hoping that there will be a quick meeting of minds.”
When asked about the timeline for creditors to finalise an agreement that would facilitate the IMF’s approval of the next loan instalment, Selassie responded, “Hopefully in the next six to eight weeks.”
A staff-level agreement for this payout was already reached last week.
Ghana, a country known for its production of gold, cocoa, and oil, is currently engaged in discussions with both bilateral and commercial creditors to restructure its debts. This effort comes amid the worst economic crisis the nation has experienced in a generation.
Ghana has faced challenges accessing international capital markets due to the escalating costs associated with domestic debt.
The country is aiming to restructure $20 billion out of total external debt which stood at $30 billion by the end of 2022, as outlined in a government presentation to investors.
Ghana aims to cut around $10.5 billion from external debt interest payments over the next three years to successfully implement the $3 billion loan deal from the IMF.
To achieve this, Ghana is in the process of restructuring its external debts through the Common Framework, a debt restructuring mechanism established by the Group of 20 (G20) leading economies. This framework is designed to assist developing nations in addressing their debt challenges, especially in response to the economic impact of the COVID-19 pandemic.
However, the process has been criticised for delays, with China being accused of causing hold-ups – something it denies.
“There’s been some learning on the Chinese side, because they’re new creditors,” Selassie said. “Hopefully going forward… we’ll be getting much more rapid response from all official creditors.”
