External Debt Payment Suspension: Ghana to be downgraded to ‘D’ – Ato Forson says
Ranking member of the Finance Committee in Parliament and Member of Parliament for Ajumako-Enyan-Esiam Constituency is predicting a possible downgrade of Ghana’s ratings to D following the declaration by the state it cannot service its external debt.
Ghana has announced it cannot service external debt including Eurobonds, and commercial and bilateral loans.
In a tweet, the MP said, “Ghana just announced it can’t service external debt including Eurobonds, commercial and bilateral loans! FYI, we cannot repay our debt because we are insolvent or bankrupt! Fitch, S&P and Moody’s are expected to immediately downgrade our rating to Default (D). Asem oo!
The Ministry of Finance on Monday 19th December 2022 issued a statement titled, ‘Suspension of payments of selected external debts of the government of Ghana’ and indicated the combination of the impact of COVID and the Russian-Ukraine war has exposed Ghana to a surge in inflation and exchange rate depreciation and stress this has put the sustainability of Ghana’s debt at risk.
According to the Ministry, the government has been compelled to launch a domestic exchange programme in an effort to address these mounting challenges.
“We, therefore, formally requested IMF assistance in July 2022. A Staff-Level Agreement (SLA) has subsequently been achieved and announced on 13″ December on a financing program aimed at restoring macroeconomic stability and debt sustainability and preserving financial stability while protecting the most vulnerable.”
“This SLA milestone was achieved in record time. It is with this same spirit that we, therefore, expect creditors to also respond in an expedited manner, to ensure that the IMF-supported programme is adopted by the IMF Board as soon as possible in early 2023,” the statement said.
The government indicated that additional emergency measures are necessary to prevent a further deterioration in the economic, financial, and social situation in Ghana and as it stands, the financial resources, including the Bank of Ghana’s international reserves, are limited and need to be preserved at this critical juncture.
“That is why we are announcing today a suspension of all debt service payments under certain categories of our external debt, pending an orderly restructuring of the affected obligations.”
“This suspension will include the payments on: our Eurobonds; our commercial term loans; and on most of our bilateral debt. This suspension will not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022, or debts related to certain short-term trade facilities. We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors,” the statement added.
It indicated the Government is ready to engage all of its external creditors to make Ghana’s debt sustainable through a fair, transparent and comprehensive debt restructuring exercise in line with international best practices.
