Debt Sustainability: We Are On Track To Achieve Targets

Finance Minister Ken Ofori-Atta has affirmed that the country is making significant progress toward achieving debt sustainability goals.

The minister provided updates on the nation’s latest macroeconomic developments and principles guiding the forthcoming public debt restructuring.

Highlighting the importance of external debt restructuring in the economy’s revival, Mr. Ofori-Atta emphasised that this endeavour is essential for the country’s financial health – acknowledging the remarkable strides made through the domestic debt exchange programme (DDEP) and the need for a successful completion of an external debt restructuring exercise.

The overarching objective of the debt restructuring operation is lowering the debt-to-GDP ratio to less than 55 percent by 2028, considering present value terms with a 5 percent discount factor – down from 89 percent at the close of 2022. The programme also aims to reduce the external debt service revenue ratio to below 18 percent starting in 2028, compared to 28 percent in 2022.

Simultaneously, it seeks to ensure that there are no gaps in external financing during the programme period. The combined fiscal efforts, along with the successful DDEP, are anticipated to reduce government debt from 109 percent to 72 percent of GDP by 2028; necessitating a 17 percent relief in present value terms from other creditors.

Mr. Ofori-Atta also underscored the significance of bilateral creditors and establishment of the Official Creditors Committee (OCC), co-chaired by France and China. The OCC has committed to providing financial assurances to ensure full funding for the IMF programme.

The finance minister expressed his optimism about the ongoing technical discussions with the OCC with an aim of reaching a preliminary agreement with bilateral creditors in the upcoming weeks, well in advance of the IMF board-meeting scheduled for November.

In addition to negotiations with bilateral creditors, Ghana has been engaged in constructive dialogues with domestic and regional bondholders as well as international bondholders. Mr. Ofori-Atta disclosed that various groups have submitted treatment scenarios, which are currently under review as part of efforts to reach an agreement that will provide substantial debt relief.

“We successfully reached the staff-level agreement on the first review of our programme on Friday, October 6, 2023,” Mr. Ofori-Atta announced.

This programme, backed by financial support of US$3billion, is poised to unlock a second disbursement of US$600million upon approval by the IMF board – resulting in a total disbursement of US$1.2billion within a six-month timeframe. These measures align closely with Ghana’s commitment to attaining its debt sustainability objectives.

Ghana’s dedication to achieving these targets is exemplified by successful completion of the Domestic Debt Exchange Programe. On this, Mr. Ofori-Atta expressed his satisfaction with the programme which featured reduced coupon rates and extended maturities. He said it is expected to generate much-needed fiscal space for government and place the domestic debt-to-GDP ratio on a sustainable trajectory.

He extended his gratitude to all participants who contributed to the exchange programme’s success.

Furthermore, the finance minister pointed out that the international community has warmly received the country’s efforts – showcasing the nation’s commitment to addressing the debt crisis comprehensively.

He reinforced Ghana’s resolve of adhering to the IMF, World Bank and new income country sustainability framework targets, underscoring the critical importance of external debt restructuring under the ongoing economic recovery process.