Ghana expects to make significant progress on restructuring its $58 billion in debt this week. On Tuesday, the country’s bilateral creditors will meet to debate whether to offer enough relief to trigger a $3 billion IMF rescue.
Ghana owes foreign governments and their state-owned banks a total of $5.5 billion. The country’s finance minister, Ken Ofori-Atta, expressed “hope” that those bilateral creditors would agree to a sufficient debt relief in order for the nation to access an IMF loan package reached last year.
“We hope on April 11 the Paris Club will meet with China present to provide financing assurances to the IMF,” he told the Financial Times. “This will be the defining input that [the IMF] will require to then go to their board.”
The first step in unlocking an IMF-backed restructuring scheme is frequently commitments from bilateral creditors to offer debt reduction. The Paris Club of bilateral creditors, whose headquarters are in France, is believed to be “doing everything” to come to an agreement on the necessary commitments, according to the French Treasury.
Ofori-Atta anticipated that China, which owes the Paris Club $1.9 billion, would agree to a deal despite not being a member.
In December, Ghana ceased making most of its debt payments, and the same month, the IMF and Ghana struck a tentative agreement on a rescue package.
However, Ghana must comply with a number of requirements before the IMF would provide assistance. These requirements include steps to generate revenue through a rise in the rate of value-added tax, tariff increases on public utilities, and a cessation of central bank financing for the government. Additionally, Ghana was urged by the fund to move forward with domestic debt restructuring.
Ofori-Atta said the fund’s conditions had been met. “Those are literally all done, so we are pretty much there,” he said. “We have done what is required.”
Other low- and middle-income nations that are in default or at risk of default are keenly following its restructuring talks.
