Adnan Adams Mohammed
An economist has predicted a bleak outlook that Ghana may find it difficult to get a debt relief of about US$10.5 billion from external creditors including bilateral lenders.
The economist asserts that, experiences from Zambia and others suggest that the road ahead for the nation to secure US$2.6 billion annually in debt relief for the next four years will be difficult.
Already, Fitch rating agency has indicated Ghana has a long way to go to restructure its more than US400 billion debt and predicting a second round of Domestic Debt Exchange Programme (DDEP). But, the country has already submitted a proposal on debt restructuring to its official creditors. Speaking in an interview, the economist said, the country may not get a favourable deal from the external creditors.
“It’s going to be a bit difficult because we’ve seen similar instances with the likes of Zambia. But there’s been a major contestation around how we treat certain creditor groups”, Policy Analyst and Economist, Dr. Theo Acheampong posited.
However, a team of experts from the International Monetary Fund (IMF), led by Stéphane Roudet, have concluded their visit to Ghana, which took place from June 8 to June 15, 2023.
The visit aimed to engage with Ghanaian authorities and stakeholders to assess recent economic developments and review the implementation of the Fund-supported program approved on May 17, 2023.
In a statement issued at the end of the visit, Mr. Roudet acknowledged positive signs of stabilization in the Ghanaian economy.
“In discussing progress on the debt restructuring operations, we reiterated that timely restructuring agreements with creditors are essential to secure the expected benefits of the Fund-supported program.”
Apparently, furthering his argument, Dr Acheampong thinks Ghana is too much exposed to Eurobonds and other commercial loans.
“So I think, the road ahead is going to be quite challenging in the sense that all the $2.6 billion they [creditors] need to get every year, it probably will not amount to that and this is just on the basis of some of the evidence we’ve seen with other countries that have attempted to go down this road”.
“It does make it quite difficult largely because most of the commercial creditors have different obligations to their shareholders, but also because Ghana in a way defaulted on making the interest payment on a number of these debt obligations since December of last year”.
Again to him, it does make the process rather much more complicated since Ghana has already indicated that it is looking at haircuts of about 30% to 50%.
“I think that is going to be a bitter pill to swallow for a number of these commercial creditors”, he added.
The move could be seen as a major step for the government to get the Official Creditor Committee including the Paris Club formed in May 2023 to consider the country’s debt restructuring programme.
This also signifies the beginning of a more detailed negotiating process that will likely see a number of proposals being exchanged.
Although, Reuters have said, the ‘working proposal’ is however not legally binding.
The Common Framework process was set up by the G20 in 2020 to bring China and other newer creditor nations into joint sovereign debt restructuring negotiations, for its external debt rework.
Ghana is hoping to cut about $10 billion out of a total of $52 billion over the next three years to successfully implement the International Monetary Fund programme.
The country’s debt to China and members of the Paris Club is estimated at $5.4 billion. As of December 2022, the total external debt stood at $28.9 billion.
It has already completed a Domestic Debt Exchange Programme in February 2023 in which about 65% of bondholders took part in the exercise.