Ghana hopes to
take a big step towards restructuring its $58bn-worth of debt this week, with
its bilateral creditors meeting on Tuesday to discuss whether to provide enough
relief to unlock a $3bn IMF bailout.
Ghana owes
$5.5bn to foreign governments and their state banks. Ken Ofori-Atta, finance
minister, said he had “hope” those bilateral creditors would consent to enough
debt relief to enable the country to tap an IMF loan package agreed upon last
year.
“We hope on
April 11 the Paris Club will meet with China present to provide financing
assurances to the IMF,” he told the Financial Times. “This will be the defining
input that [the IMF] will require to then go to their board.”
Commitments from
bilateral creditors to provide debt relief are often the first step to
unlocking an IMF-backed restructuring programme. The French Treasury, which
hosts the Paris Club of bilateral creditors, said the group was “doing
everything” to reach an agreement on the commitments required.
China, which is
owed $1.9 billion, was expected by Ofori-Atta to agree to a deal, despite not
being a member of the Paris Club.
Ghana stopped
repaying most of its debts in December and reached a preliminary deal with the
IMF on a rescue package in the same month.
But the IMF’s
support is dependent on Ghana meeting a string of conditions, including
measures to raise revenues through a rise in the rate of value-added tax,
tariff increases on public utilities and an end to central bank finance for the
government. The fund also asked Ghana to make progress on restructuring its
domestic debts.
Ofori-Atta said
the fund’s conditions had been met. “Those are literally all done, so we are
pretty much there,” he said. “We have done what is required.”
Its restructuring
talks are being closely watched by other low and middle-income countries who
are in, or at risk of, default.
Zambia defaulted
on its debts in 2020 and its debt restructuring — on which a $1.3 billion IMF
programme depends — has stalled amid disagreement among its creditors. Sri
Lanka defaulted last year and finally won the backing of the IMF for a $3bn
bailout last month.
A breakthrough
in Ghana’s debt talks could raise hopes of faster workouts in the restructuring
of other countries’ debts in the future.
The IMF and
World Bank have warned that a third of developing countries, including 60 per
cent of low-income countries, have debts that are unsustainable or in danger of
becoming so.
The pandemic,
Russia’s war on Ukraine and last year’s surge in global inflation and in the
value of the US dollar against other currencies have pushed many countries into
economic crisis and to the brink of default.
Once bilateral
lenders have promised enough relief to make a country’s debt sustainable, it is
up to the borrower to seek similar terms from other lenders including
bondholders and commercial banks.
Data from
Ghana’s central bank show that the country had external public debts equal to
44 per cent of gross domestic product in September or about $34 billion, according
to the IMF. Domestic public debts were equal to 32 per cent of GDP, or about
$24 billion.
Ghana halted
payments on most of its external debts in December and called on holders of
about $11 billion of its domestic debt to take part in an exchange that would
significantly reduce the cost of debt service. Holders of about 85 per cent of
the eligible domestic debt had agreed to take part, Ofori-Atta said
Source: Citinewsrrom.com
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