IMF boss: Be fair to all parties in external debt negotiations.

The International Monetary Fund’s (IMF) Managing Director, Kristalina Georgieva, has counseled Ghana’s government to maintain equity in its negotiations to restructure the country’s approximately $20 billion in external obligations with both bilateral and commercial creditors.

Because comparable treatment was essential to the debt restructuring exercise’s successful conclusion, she said the government needed to show caution while interacting with creditors on both ends.

During her three-day visit to Ghana, she stated in an interview with a few chosen media outlets that “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.”

Ghana, according to her, must thus keep in mind that decisions made on one side may have an impact on conversations with another.

Remember that there must be justice while interacting with the creditors on both sides. According to her, every creditor must acknowledge that they have received fair treatment after the deal.

discussions with external creditors
Under the three-year IMF program, Ghana started a debt restructuring exercise that included both domestic and external debt to restore debt sustainability and lower the debt-to-GDP ratio to 55% by 2026.

The government exchanged 12 bonds worth GH¢82 billion for new ones with longer tenors and lower coupon rates as part of the completed domestic debt restructuring process.

The Ministry of Finance announced on January 12 that the nation had reached an agreement with its official creditors to restructure bilateral debts of approximately US$5.4 under the G20 Common Framework on a comprehensive Debt Treatment Beyond the Debt Service, following months of protracted negotiations with the Bilateral Official Creditor Committee, which is co-chaired by France and China.

To formalize a memorandum of understanding that would then be implemented through bilateral agreements with each member of the OCC, the government has been interacting with the OCC since this agreement.

Regarding business, the government stopped paying interest on its commercial loans in December 2022. Since then, it has been in contact with these companies to discuss a potential restructuring of debt totaling approximately US$14 billion, of which US$13 billion is held in Eurobonds.

Nice location
Regarding the debt restructuring initiatives, Ms. Georgieva stated that Ghana was now in a good situation and that the nation’s talks with its bilateral creditors were progressing.

She said, “There is very real progress towards signing the Memorandum of Understanding with OCC and advanced talks with the private sector creditors as well.”

In the end, she stated, the choices made during the debt restructuring process will affect the nation’s budgetary room and enable it to make investments in a few key sectors.

“We want to see both the share of debt to GDP and the share of debt service in government revenues to decline significantly to open up some fiscal space for critical investments in digital infrastructure, health care, and education,” the speaker stated. “These metrics are credible anchors.”

Travel to Ghana
The head of the IMF commented on her trip to Ghana, saying she was impressed with the progress made thus far and had productive, in-depth talks with officials and civil society.

“Ghana has seen a very trying period, and I am appreciative of the government’s dedication to collaborating with us to offer promising futures for the country’s economy.

“We have seen strong performance under the program and reforms are starting to bear fruit,” she said. “Our program came at the right time to support Ghana significantly.”

She said that the government had started extensive reforms, made the necessary policy adjustments, and started a thorough debt restructuring process.

She claimed that as a result, there were new indications of economic stability.

“We had estimated that Ghana would increase by 1.5% in 2023, but the country grew by 2.3%. Additionally, we predicted that inflation would decline from the 54% reported in 2022 to roughly 27%, but it fell to 23%.

She said, “Exchange rate volatility has decreased and both the fiscal and external positions have improved.”

She noted that more work needed to be done and urged the administration to keep moving forward to rebuild trust and fully restore macroeconomic stability and debt sustainability while fostering a more robust, inclusive, and broadly beneficial economy.

“I want to affirm our strong commitment to the program. The IMF team will be back in April so we can jointly define what has been achieved and what more needs to be done,” the IMF representative stated.

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