Peter Quartey — Economist
Peter Quartey — Economist

Use part of $600m IMF support to settle maturing domestic coupons - Prof. Quartey tells govt

Government must use part of the proceeds from the International Monetary Fund (IMF) to settle maturing coupons on domestic bonds and other domestic loans, an economist, Professor Peter Quartey, has advised.


According to him, these due payments had already been captured in the 2023 budget and, therefore, there would be nothing wrong with the government using a portion of what the IMF had released to settle those obligations.

The IMF Executive Board approved, on May 17, about US$3 billion 36-month Extended Credit Facility (ECF) arrangement for Ghana.

The decision enabled an immediate disbursement equivalent to about US$604 million with the rest expected to be disbursed in tranches every six months, following programme reviews approved by the IMF Executive Board.

Minister of Finance, Ken Ofori-Atta, said, at a press conference in Washington last Thursday, that the first tranche of the Extended Credit Facility would be used to support the implementation of the 2023 budget.

The budget has suffered some initial setbacks due to some factors, including the lack of adequate tax revenues to carry out major projects and settle maturing coupons on domestic bonds.

Although the Finance Minister’s comment seemed a deviation from the earlier communication that the bailout funds would be used to support the country’s balance of payment position, Professor Quartey said the IMF had become more flexible in recent times and would support any positive actions the government would take as far as the usage of the funds was concerned.

He noted, for instance, that the support from the IMF was a mid-term programme and “since the budget is an annual expenditure framework, it fits into the spending strategy and, therefore, all projected payments in the 2023 budget must be considered”. 

Bondholders pressure

The Government has been under intense pressure since the beginning of the year from individual bondholders who refused to participate in the Domestic Debt Exchange Programme (DDEP), which saw the government exceed its target of 80 per cent participation.

One group, the Pensioner Bondholders Forum has, for instance, been picketing at the Ministry of Finance occasionally as they demand the payment of both their matured coupons and principals.

Other groups have also taken turns to pressurise the government to honour its obligations but that has not yielded any results.


Last month international rating agency, Fitch downgraded Ghana’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to Restricted Default (RD) from CCC.

This was a result of the government’s missed payments on some of the local currency-denominated bonds issued before the DDEP.

It is expected, according to analysts that, should the government honour its obligation to the bondholders, it would positively impact Ghana’s ratings.

The unprecedented downgrades of the country’s creditworthiness have seriously impacted its ratings negatively, preventing potential investors from pushing funds into what was earlier perceived to be a risk-free instrument.

Fiscal discipline

To foster lasting fiscal discipline, the government has advanced reforms to enhance domestic revenue mobilisation, strengthen public financial management, and tackle the deep challenges in the energy and cocoa sectors.

The government has also implemented a comprehensive debt restructuring, including both domestic and external debt, to place debt on a sustainable path.

It is, however, not clear whether the government, having had some fiscal space and external credibility, will embark on another reckless borrowing spree with the tendency to erase the benefits of the ongoing exercise.

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