Minister for Finance, Dr Mohammed Amin Adam has stated that the government of Ghana and its external bondholders have reached an interim agreement in ongoing negotiations aimed at restructuring the country’s thirteen billion dollars external debt.
The ministry disclosed this in a post on Monday, 15 April 2024 @ the office of the finance minister-Ghana, its X (formerly Twitter) handle. The finance ministry indicated in its post that the agreement reached will still have to go through some fine-tuning to meet the targets set under the International Monetary Fund (IMF) debt sustainability agreement (DSA).
“Update on External Debt Operations: Ghana and Bondholders reached an interim deal, which must still be tweaked to meet IMF debt sustainability targets. We will therefore regroup to continue negotiations until we reach a deal that is consistent with IMF debt sustainability targets,” the X post of the finance ministry read.
Some news portals have been reporting that Ghana has failed to reach a debt deal with its eternal bondholders. However, the finance ministry in clarifying the claims noted that the ongoing negotiations cannot be described as a failure but it is rather part of an ongoing process to reach an agreement that will be consistent with the debt thresholds under the DSA.
“We have made significant progress on the debt restructuring negotiations and the Government of Ghana thanks bondholders for their support in this process. We are regrouping to continue the negotiations, towards reaching an agreement on final terms that are consistent with IMF debt sustainability targets,” the finance ministry further pointed out.
“Ghana’s economy fared better than the IMF expected, expanding 2.9% in 2023 compared to an initial IMF target of 1.5%. That means a revised DSA would accommodate the agreement with bondholders, Finance Minister, Mohammed Amin Adam told Bloomberg in an interview following the announcement by the ministry on the progress made in the ongoing negotiations with the country’s external creditors.
The IMF in a statement regarding Ghana’s ongoing negotiations with its external creditors observed that the “working scenario” presented by the government of Ghana needs further consideration to align it fully to the debt sustainability agreement between the IMF and the government of Ghana.
“The IMF will continue to support the ongoing restructuring negotiations between the authorities and their external commercial creditors with the view to reach an agreement that is consistent with program parameters,” the IMF said in a statement.
To meet its IMF target, managers of the $77 billion Ghanaian economy need to reduce debt to 55% of gross domestic product by 2028, compared with a burden of 109% that was projected for the year before Ghana began restructuring. The current bondholder agreement would leave debt slightly above that target.
Ghana began working to revamp its debt a little over a year ago as part of a deal with the International Monetary Fund, reaching an agreement in principle with bilateral creditors in January to rework $5.4 billion of obligations under the Group of 20 Common Framework for Debt Treatment. That agreement set the tone for the restructuring of Eurobonds.
On 1 July 2022, President Akufo-Addo authorized the Minister for Finance then, Ken Ofori-Atta, to open formal engagement with the International Monetary Fund (IMF) to secure a $ 3 billion extended credit facility to support the country’s finances which took a bad hit as a result of the effects of the COVID-19 pandemic and the effects of the geopolitical war between Russia and Ukraine.
As part of the process, Ghana undertook a successful domestic debt restructuring and also kickstarted negotiations with her external creditors to secure a debt restructuring agreement with them to support the country’s IMF programme.
Thus far, Ghana has secured the 3-billion-dollar IMF programme and has already received $1.2 million in two 600-million-dollar tranches. On Saturday, 13 April 2024, the country reached a staff-level agreement with the IMF for a third tranche of $360 million to be released pending the approval of the executive board of the IMF.
