Ghana’s hope of securing an International Monetary Fund board approval soon is expected to delay owing to prolonged external debt-restructuring negotiations, and the involvement of numerous stakeholders in the process.
This is according to London-based economic and political analyst, the Economist Intelligence Unit (EIU).
The EIU in its 2023 Country Report on Ghana, stated that it anticipates Ghana to secure restructuring agreements on its public external debt during 2023-24, involving official and private creditors alike.
It however notes that, given the country’s pressing macroeconomic crisis, “the conclusion of a domestic debt-swap operation in February and increasing international attention on speeding up external debt restructurings, our core forecast remains that the IMF programme will be approved by mid-2023.”
“We expect Ghana to secure restructuring agreements on its public external debt during 2023-24, involving official and private creditors alike. This will include a combination of write-offs, maturity extensions and reductions in interest rates. We expect official creditors to agree to a deal in 2023, and this, combined with the domestic debt restructuring that has already been secured, should provide enough reassurance to reduce Ghana’s risk of debt distress and allow the IMF to approve the agreed programme”.
“However, there is a material risk that IMF board approval will be delayed owing to prolonged external debt-restructuring negotiations, given the involvement of multiple stakeholders in the process,” it noted.
The Finance Minister, Ken Ofori-Atta, earlier this year indicated that Ghana is likely to receive the International Monetary Fund’s (IMF) Board approval for a $3 billion bailout by the close of May 2023.
Mr. Ofori Atta said Ghana has made significant progress in terms of restructuring its debt and called on external creditors to support the country’s application for an IMF programme.
This has raised missed expectations among many stakeholders as the country had earlier hoped to secure an economic bailout with the IMF in March.
In July 2022, Ghana requested for a three-year, US$3bn extended credit facility (ECF) from the IMF. An arrangement was agreed with the IMF in December 2022, with the aim of restoring credibility among investors, building reserve buffers and improving fiscal and debt sustainability.
However, debt restructuring needs to be agreed upon with Ghana’s external creditors before the IMF’s Executive Board can sign off on the ECF.
The EIU report also highlights that on the back of Ghana’s discussions with the IMF, the risk that the country will fail to regain access to international bond markets will be high in the near term, given investor concerns over high debt and prolonged restructuring negotiations.
The EIU further warned that macroeconomic instability and a public debt crisis will weigh on Ghana’s business environment and its ambitions to become a West African trading hub. A weak regional regulatory environment, poor transport links, and low foreign trade, except in commodities, will also hamper progress.
The report emphasizes the need for Ghana to remain committed to fiscal consolidation in 2023-27, underpinned by an IMF program, to bring the public finances and debt back onto a sustainable path.