President Nana Akufo-Addo’s government secured a staff-level agreement in December as the country defaulted on most of its foreign debt amid the worst downturn in a generation.
The country expects its bilateral lenders – which include China and Paris Club members – to provide financial assurances by next month, Finance Minister Ken Ofori-Atta said on 13 April, setting the stage for the IMF to approve a new loan in the second quarter of 2023.
In all, about $20bn of Ghana’s external debt – two-thirds of the total – are eligible for restructuring, Ofori-Atta said in a briefing along with Central Bank Governor Ernest Addison, Reuters reports. The minister added that Ghana needs another $1.5bn in financial stability funding to ensure appropriate solvency and liquidity, with the World Bank already putting forward $250m and the Ghanaian government another $500m.
Beyond progress on debt restructuring, the IMF expects Ghana to make a number of structural reforms before it get its latest bailout, its 18th since 1966.
These include developing a medium-term plan to generate additional revenue and advancing reforms to bolster tax compliance; strengthening public expenditure commitment controls; improving fiscal transparency – including the reporting and monitoring of arrears – and the management of public enterprises; reforming the subsidized energy and cocoa sectors; promoting exchange rate flexibility; and strengthening social safety nets.
Swift response
The rapid response to Ghana’s debt crisis comes amid growing international impatience with creditors’ slow-rolling of restructuring agreements.
While the G20 group of major economies adopted a Common Framework for debt treatment in late 2020, so far only Chad has reached a deal with creditors under the scheme. Meanwhile Zambia and Ethiopia – recently joined by Ghana – are still waiting for their Chinese creditors to accept a haircut.
Speaking to reporters on 13 April, IMF Managing Director Kristalina Georgieva applauded Ofori-Atta’s “proactive role” in reaching out to Ghana’s creditors.
“We have been in constant contact with the authorities in Ghana,” Georgieva said. “We have worked very hard – and very swiftly – to have the $3bn support program for Ghana in place.”
Now it’s time for creditors to step up, she said.
“We are expecting that next week there will be discussions among creditors,” Georgieva said.
“And I can tell you that I use every opportunity, myself, to urge them to act swiftly. Let’s remember that Ghana for a long time, has done really well to tap markets to finance its growth. It has been like all innocent bystanders hit by covid, hit by the war in the Ukraine. And this has complicated domestically the ability to finance the budget. So a country that has a long track record of sound economic management ought to be supported to return to markets.”
She urged Ghana watchers to “stay tuned, and stay positive.”
“To tell you the truth, I am actually quite optimistic,” Georgieva said. “I think the creditors are going to move – and we’re going to move – swiftly.”
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