IMF/World Bank Spring Meetings: Ofori-Atta to engage external creditors next week for $3bn bailout
Ghana is set to begin discussions with external creditors at the ongoing IMF/World Bank Spring Meetings with a view to achieving a consensus on an external debt restructuring. The ultimate goal of the discussions is to secure a Board approval from the IMF for a $3bn bailout for the West African country.
According to the Managing Director of the IMF, Kristalina Georgieva, the IMF has worked tirelessly to ensure that Ghana quickly secures a bailout programme. This comes as the country faces mounting external debt pressure, with its debt-to-GDP ratio currently hovering around 76%.
In a recent interview, Georgieva noted that the IMF has urged creditors to act swiftly in supporting Ghana’s efforts to restructure its debts. She also praised Ghana for its sound economic management, which has enabled the country to perform well on the capital market. Georgieva remarked that “Ghana has for a long time done really well on the capital market and has a long track record of sound economic management, and therefore, ought to be supported.”
The ongoing discussions between the Ghanaian government and its external creditors are expected to kick off next week. However, the outcome of these talks remains uncertain. It remains to be seen if both parties will be able to reach a consensus on an external debt restructuring plan that will satisfy the IMF’s requirements for a $3bn bailout.
One of the key challenges that Ghana faces in securing external debt relief is the high level of indebtedness of its state-owned enterprises (SOEs). According to the IMF, Ghana’s SOEs owe over $6bn in debt, which is equivalent to about 2% of the country’s GDP. The IMF has, therefore, called for the country to prioritize the restructuring of these debts as part of its overall efforts to reduce its external debt burden.
It is also worth noting that Ghana has been a beneficiary of the IMF’s COVID-19 emergency financing facilities, having received a $1bn Rapid Credit Facility (RCF) in April 2020. The RCF was aimed at helping the country address the economic impact of the COVID-19 pandemic. However, the IMF has stressed that the country needs additional external financing to support its recovery efforts.
The ongoing discussions between Ghana and its external creditors are a critical step in the country’s efforts to secure a $3bn bailout from the IMF. While the country has a strong track record of sound economic management, the high level of indebtedness of its SOEs remains a key challenge that needs to be addressed. As such, the success of the talks will depend largely on the ability of both parties to reach a consensus on an external debt restructuring plan that satisfies the IMF’s requirements.
