Ghana seeks relief from Chinese debt burden through moratorium extension and lower interest rates
Ghana’s relationship with China has been a significant aspect of its economic growth and development in recent years. China has been one of Ghana’s largest trading partners, with bilateral trade reaching $6.7 billion in 2019. However, the COVID-19 pandemic has had a significant impact on Ghana’s economy, resulting in a decline in revenue and an increase in public debt. In light of this situation, Ghana has requested a restructuring of its $1.9 billion debt owed to China.
Recently, a delegation from China’s EXIM Bank visited Ghana to engage with the government on this issue. The meetings have been described as “highly cordial and fruitful,” and technical discussions have been positive so far. The Ghanaian government is seeking a range of reliefs, including an extension of the moratorium on debt servicing, an extension of maturities, and lower interest rates.
The negotiations come at a crucial time for Ghana, which is seeking to stabilize its economy and promote growth. The country’s GDP growth rate declined from 6.8% in 2019 to 0.9% in 2020 due to the pandemic. Meanwhile, Ghana’s public debt-to-GDP ratio increased from 62.4% in 2019 to 76.1% in 2020. The International Monetary Fund (IMF) has projected that Ghana’s debt-to-GDP ratio will rise to 85.2% in 2021, making it one of the highest in sub-Saharan Africa.
The debt restructuring negotiations with China are therefore critical for Ghana’s economic outlook. The government has emphasized the need for an exemplary debt treatment solution that could serve as a model for China’s future engagements with other African countries. This approach reflects Ghana’s efforts to maintain a strong relationship with China while seeking to address its debt challenges.
Ghana’s Finance Minister, Ken Ofori-Atta, has been at the forefront of these negotiations, urging China to grant Ghana an exemplary debt treatment solution. He has emphasized the importance of strengthening the relationship between Ghana and China while working towards a sustainable solution to Ghana’s debt challenges. Ofori-Atta has also hinted at a planned high-level government delegation to China in late March to further engage with Chinese officials on this issue.
The outcome of these negotiations will have significant implications for Ghana’s economic growth and development trajectory. A successful debt restructuring could provide Ghana with the breathing space it needs to stabilize its economy and promote growth. It could also strengthen the country’s relationship with China, one of its most significant trading partners. On the other hand, a failure to reach an agreement could result in increased debt distress and constrain Ghana’s ability to access international capital markets.
Overall, the ongoing negotiations between Ghana and China are a key issue that will continue to shape the country’s economic outlook in the coming months. Ghana’s government is committed to finding a sustainable solution to its debt challenges while maintaining a strong relationship with China. It remains to be seen how these negotiations will play out, but the outcome will have far-reaching implications for Ghana’s economic future.
