External debt negotiations: Be fair to all sides — IMF boss urges govt
The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has advised the Ghanaian government to ensure fairness as it engages with both its bilateral and commercial creditors to restructure external debts of about US$20 billion.
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She said the government must be cautious about comparability of treatment as it engages both sides of creditors, bearing in mind that comparability of treatment was paramount for the successful completion of the debt restructuring exercise.
“It has become clear in these discussions under the common framework that with a much more diverse creditor environment, the question of comparability of treatment becomes paramount for successful completion of debt restructuring,” she said in an interview with some selected media houses as part of her three-day visit to Ghana.
She said Ghana must therefore bear in mind that decisions reached on one side might influence discussions with another.
“As you engage creditors of both sides, be mindful that there is fairness. All creditors must come out of the agreement recognising that they have been treated fairly,” she stated.
Negotiations with external creditors
In a bid to restore debt sustainability and reduce debt to GDP ratio to 55 per cent by 2026, Ghana, under the three-year IMF programme embarked on a debt restructuring exercise which comprised both domestic and external.
The domestic debt restructuring exercise, which has been concluded, saw the government swap bonds worth GH¢82 billion for 12 new ones at reduced coupon rates and longer tenors.
After months of prolonged negotiations with the Bilateral Official Creditor Committee co-chaired by France and China, the Ministry of Finance on January 12 announced that the country had reached an agreement with its official creditors to restructure bilateral debts of about US$5.4 under the G20 Common Framework on a comprehensive Debt Treatment Beyond the Debt Service Suspension Initiative (DSSI).
Following this agreement, the government has been engaging the OCC to formalise a memorandum of understanding which would then be implemented through bilateral agreements with each member of the OCC.
On the commercial side, the government in December 2022 suspended payments of interest on its commercial loans and has since been engaging them on a possible restructuring of debts of about US$14 billion, out of which US$13 billion are in Eurobonds.
Good place
Ms Georgieva said Ghana was in a good place now concerning the debt restructuring efforts, noting that the country was at an advanced stage with its negotiations with the bilateral creditors.
“There is very tangible progress towards signing the MoU with OCC and advanced discussions with the private sector creditors as well,” she stated.
Ultimately, she said the decisions taken under the debt restructuring exercise would influence the country’s fiscal space and allow it to invest in some priority areas.
“A credible anchor is the share of debt to GDP as well as the share of debt service in government revenues and what we want to see if for both to decline significantly to open up some fiscal space for critical investments in education, health care and digital infrastructure,” she said.
Visit to Ghana
Commenting on her visit to Ghana, the IMF Chief said she had positive in-depth discussions with authorities and civil society and was impressed with the progress made so far.
“Ghana has gone through a very difficult time and I am grateful to the government for the commitment to work with us to bring good prospects for the economy of Ghana.
“Our programme came at the right time to support Ghana significantly and we have seen strong performance under the programme and reforms are starting to bear fruit,” she mentioned.
She said the government had adjusted policies appropriately, launched a comprehensive debt restructuring exercise and initiated wide-ranging reforms.
As a result, she said signs of economic stabilisation were re-emerging.
“We projected a growth of 1.5 per cent in 2023 but Ghana outperformed the growth forecast and recorded 2.3 per cent. We also projected inflation to go down to about 27 per cent from the 54 per cent recorded in 2022 but it dropped to 23 per cent.
“Both the fiscal and external positions have improved and exchange rate volatilities have eased,” she stated.
She said there was work still to be done and therefore urged the government to continue on this path to rebuild confidence to fully restore macro-economic stability and debt sustainability while promoting an economy that was more inclusive, strong, vibrant and benefited all.
For the part of the IMF, she said, “I want to confirm our strong commitment to the programme, the IMF team will be back in April so we can jointly define what has been achieved and what more needs to be done”.