Ghana fears setback to SLA; excludes IMF, World Bank from suspension of external debt payments
Ghana’s Finance Chief Ken Ofori-Atta on Monday, December 19, announced the suspension of payment on selected external debts including payment on Ghana’s Eurobonds, commercial term loans, and bilateral debt.
In a statement issued by the Finance Chief on Monday, the suspension of external debt payments forms part of “additional emergency measures necessary to prevent a further deterioration in the economic, financial, and social situation in Ghana.”
According to the Finance Chief, “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 19 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,” he added.
A careful examination of the statement by the Finance Chief by norvanreports indicates the exclusion of multilateral debts payments (old and new) by the country to multilateral institutions such as the IMF and World Bank.
Data available to norvanreports indicates that Ghana owes over $8bn in multilateral debts.
In norvanreports’ view, the exclusion of multilateral debts owed the IMF and World Bank by the country, is to avoid a possible setback to the recently attained Staff-Level Agreement (SLA) between Ghana and the IMF.
Ghana on December 12, 2022 signed a SLA agreement with the IMF for a $3bn Extended Credit Facility (ECF) programme from the IMF.
According to government, the ECF programme aims at restoring macroeconomic stability and debt sustainability while protecting the vulnerable, preserving financial stability, and laying the foundation for strong and inclusive recovery.
Adding that the programme, envisages wide-ranging reforms to address structural weaknesses and enhance resilience to shocks.
But despite the SLA reached by government and the IMF, the eventual approval of the ECF programme by the Board of the IMF is dependent on a number of factors.
IMF Mission Chief to Ghana, Stéphane Roudet, states that approval of the ECF programme for Ghana by the IMF Board will be dependent on support for government’s Domestic Debt Exchange Programme (DDEP) by creditors (both external and domestic) as well as the ability of the programme to restore Ghana’s debt to a sustainable level.
“Assurances from Ghana’s creditors that they will support the Domestic Debt Exchange Programme and the ability of the programme to sufficiently restore debt sustainability, will the be among the major reasons for which the IMF Board will approve the ECF programme,” he said.
