Ghana's Economy In Jeopardy As Debt Restructuring Talks With Creditors Goes Slow

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Ghana's aspirations for economic stability in 2024 are in jeopardy due to the poor development of talks with official creditors regarding the restructuring of Ghana's external debt. After the New Year, Ghana's efforts on restructuring its external debt have not produced any notable progress. 

Related To This: Ghana's Official Creditors Set to Discuss Debt Restructuring on January 8

Getting the next $600 million payment from the IMF depends on there being no firm commitment from official creditors. Debates about the extent of debt relief that should be provided to Ghana have been going on for a while among external creditors.

Ghana's bilateral creditors were scheduled to meet on January 8, 2024, to decide on the amount of debt reduction, with an emphasis on deciding on a single deadline. 

However, as of now, there has been no communication from official creditors regarding the outcomes of this meeting.

Ghana is actively seeking debt relief and aims to renegotiate approximately $5.4 billion of its bilateral debt. The delay in scheduled disbursements stems from Ghana's inability to acquire the necessary financial assurances from its external creditors, which are anticipated to unlock approximately $2.2 billion in fiscal space to bolster its balance of payments for 2024.

Related To This: IMF Reschedules Ghana's Review and Disbursement Meeting Over $600 Million To January 2024

Experts and those well-versed in Ghana's IMF programme express concern that the country's failure to obtain the required financial assurances might extend the programme beyond 2026. This risk could jeopardize Ghana's ability to access the entirety of the available funds, potentially derailing the country's medium-term plan to return to acceptable debt sustainability levels.

Ghana has engaged with its official creditors, notably the Paris Club, to request debt relief before. The last similar engagement took place in May 2002 under the HIPC programme. During those negotiations, Ghana's debt servicing cut-off date was adjusted, and the remaining amounts were rescheduled over a period of time. These measures were expected to decrease Ghana's debt service owed to Paris Club creditors significantly.

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