Ghana nears $3bn IMF deal after successful debt exchange programme
Ghana is closing in on a deal worth around GH¢3 billion with the International Monetary Fund (IMF) after the successful completion of the Domestic Debt Exchange Programme (DDEP). Over 80% of eligible bondholders participated, meeting a condition for the IMF deal.
The IMF’s Executive Board is expected to approve the bailout request by the end of Q1 2023, subject to a number of prior actions being taken. One of these actions is the restructuring of public liabilities through the debt exchange programme, which the government is working to complete.
The successful closure of the DDEP has paved the way for the government to take action towards a full agreement with the Fund. The government is also seeking to restructure its foreign debt and has initiated discussions with bilateral lenders to create an official creditor committee.
This committee is a key step in beginning negotiations on debt relief, and its establishment is essential to the approval of the IMF programme. If it is not created, the disbursement of much-needed funds could be delayed.
Ghana is hopeful of a rapid debt overhaul, despite other countries experiencing slow progress under the common debt restructuring framework treatment. German Finance Minister Christian Wolfgang Lindner has pledged unwavering support for the creditor committee’s establishment at the Paris Club for Ghana.
He called on all creditors to participate and reminded China of its responsibilities as a significant bilateral creditor to Ghana. The Paris Club of creditor nations has contacted other bilateral creditors, such as China and India, to engage in forming the committee.
Ghana is the fourth country to request a debt restructuring under the G20 Common Framework, which was established in 2020 to simplify the coordination of creditor governments in restructuring debts of low-income countries after the COVID-19 pandemic.
According to data from the Institute of International Finance (IIF), China is Ghana’s single biggest bilateral creditor, with US$1.7 billion of debt, while the country owes US$1.9 billion to Paris Club members. Chinese lending represents around 80% of non-Paris Club debt, as the nation’s total external debt is US$28.4 billion.
In December 2022, the main holders of Ghana’s foreign debt established a creditor consortium to negotiate debt restructuring with the government after a surprise announcement about the suspension of interest payments on its external debt. Refinitiv data shows that Ghana’s dollar-denominated debt ranges from 2023 to 2061, totalling more than US$13 billion.
The nation’s Debt Sustainability Analysis (DSA) shows that debt servicing absorbs more than half of total government revenues and almost 70% of tax revenues. Additionally, the total public debt stock, including that of state-owned enterprises among others, exceeds 100% of the gross domestic product (GDP) and had accelerated to GH¢575.7 billion at the end of November 2022, according to official data.
Ghana’s quest for debt relief is making steady progress. With the successful completion of the DDEP, the government is one step closer to securing a deal with the IMF.
However, much work remains to be done, including the restructuring of public liabilities and the establishment of an official creditor committee. Despite the challenges, the government remains committed to the IMF programme and is hopeful of completing all prior actions by the end of March 2023.
