The International Monetary Fund (IMF) has shed light on the country’s debt situation and the progress made in restructuring efforts. While Ghana’s debt distress has been a cause for concern, the report highlights the completion of a significant portion of the domestic debt restructuring process and outlines the government’s strategy for achieving debt sustainability.
With the IMF’s support and the implementation of appropriate policies, Ghana aims to restore a moderate risk of debt distress by 2028. These developments provide a glimmer of hope for the country’s economic recovery.
Debt Restructuring Strategy and Reforms:
The IMF report emphasizes the effectiveness of the authorities’ debt restructuring strategy, which, combined with ongoing reforms, is expected to yield positive outcomes.
By eliminating all breaches under the Lower-Income Countries – Debt Sustainability Framework (LIC-DSF) by 2028, Ghana aims to achieve debt sustainability and restore a moderate risk of debt distress. This comprehensive approach underscores the government’s commitment to addressing the debt crisis and creating a more stable economic environment.
Financing Assurances and Arrears Management:
To navigate the challenging debt landscape, Ghana suspended external debt payments to official bilateral and external commercial creditors since December 2022. Consequently, the country has been accumulating arrears to these creditors, given its debt distress position.
Recognizing the need for adequate representation and addressing arrears, the IMF expects the financing assurances provided under the Common Framework to be instrumental in managing these challenges. This framework will play a crucial role in deeming arrears to other official bilateral creditors as dealt with under the Lending into Official Arrears (LIOA) Policy.
Good Faith Efforts and Collaborative Restructuring
Adhering to the IMF’s Lending into Arrears (LIA) policy, the report highlights the Ghanaian authorities’ commitment to reaching a collaborative restructuring agreement. The government has been actively engaged in early dialogue, promptly sharing information, and allowing creditors to provide input on the restructuring strategy. These good faith efforts are crucial for building trust and fostering cooperation among stakeholders involved in the debt restructuring process.
Importance of Policy Implementation and IMF Support
The successful implementation of Ghana’s adjustment program relies heavily on the adoption of appropriate policies and timely support from the IMF. The report underscores the significance of aligning fiscal and monetary policies with the goal of debt sustainability.
With the IMF’s approval of a $3 billion Extended Credit Facility (ECF) program following Ghana’s completion of its debt exchange, the country has gained additional resources to support its economic recovery efforts. This injection of funds will provide vital assistance in managing the debt crisis and promoting long-term economic stability.
Positive Indicators: Decreasing Debt Stock
Notably, Ghana has made progress in reducing its public debt stock. Data from the Bank of Ghana reveals a significant decrease of ¢141.1 billion in December 2022, bringing the year-end debt total to ¢434.6 billion, which accounts for approximately 71.2% of the Gross Domestic Product (GDP). This reduction reflects the effectiveness of the debt exchange completed by Ghana, setting the stage for further economic improvements. In dollar terms, the debt stood at approximately $52 billion, indicating the magnitude of the challenge faced by the country.
While Ghana’s debt distress has been a cause for concern, the IMF Staff Report highlights the positive strides made in debt restructuring and the government’s commitment to achieving debt sustainability. Through a combination of strategic reforms, good faith efforts, and support from the IMF, Ghana aims to restore a moderate risk of debt distress by 2028.
The reduction in public debt stock and the approval of the $3 billion ECF program signify positive developments and provide hope for Ghana’s economic recovery. As the country moves forward, prudent policy implementation and continued collaboration will be crucial in solidifying its path to long-term stability and growth.
