IMF bailout: Gov’t reaches debt treatment agreement with Official Creditors

The government of Ghana has reached a debt restructuring agreement with its official creditors under the Group of 20 (G20) common framework.

The Ministry of Finance announced the agreement in a statement dated January 12, 2024, saying, “This development constitutes a significant positive step towards restoring Ghana’s long-term debt sustainability.” This is a crucial step forward in securing IMF board approval for the release of the second tranche of the $3 billion “rescue loan.”

“This agreement with the Official Creditors paves the way for IMF Executive Board approval of the first review of the Fund-supported programme, allowing for the next tranche of IMF financing of US$600 million to be disbursed,” the Finance Ministry noted.

“The IMF Board Approval should also trigger World Bank Board consideration of US$300 million Development Policy Operation (DPO) financing. In addition, the World Bank is expected to support the Ghana Financial Stability Fund with US$250 million to help address the impact of the Domestic Debt Exchange Programme (DDEP) on the financial sector. These disbursements are key for Ghana’s economic recovery and ambitious reform agenda,” the statement added.

According to the Finance Ministry, the agreement with the country’s official creditors was under the G20 Common Framework on a “comprehensive Debt Treatment Beyond the Debt Service Suspension Initiative,” owing to the successful completion of the Domestic Debt Exchange Programme (DDEP) in 2023.

Ghana in 2022 asked for a bilateral debt restructuring under the Common Framework, a process set up during the COVID-19 pandemic by the G20 leading economies.

The statement further revealed that the debt treatment agreement will be “formalised in a Memorandum of Understanding (MoU) between Ghana and Official Creditors, which will then be implemented through bilateral agreements with each member of the Official Creditor Committee.”

The Finance Ministry is also confident that the agreement reached with the OCC will lead to successful engagements with Ghana’s commercial creditors.

“Today’s [Jan. 12] agreement with Official Creditors will support ongoing engagements with Ghana’s commercial creditors, including bondholders. The Government of Ghana remains committed to reaching an agreement with its commercial creditors as soon as possible,” it said.

The statement further touted the relative stability of the Ghanaian cedi, the decline in inflation to 23.2 % in December last year from 54.2 % same period in 2022, and the overall GDP growth of 2.8 % for the first three quarters of last year as evidence of the economy turning the corner.