CEM REPORT, ECONOMY | After securing a crucial debt restructuring agreement with official creditors, Ghana is poised to receive a vital $600 million rescue loan payout from the International Monetary Fund (IMF).
According to Reuters, the IMF executive board is set to approve the second tranche of funding under a $3 billion bailout program this Friday, following the official announcement of the debt deal with China, France, and other bilateral lenders late last week.
“This agreement paves the way for the IMF’s first review of Ghana’s program,” declared IMF Managing Director Kristalina Georgieva, applauding the successful debt restructuring negotiations. “Once the review is finalized and the board convenes, approval is typically a formality.”
The $5.4 billion debt restructuring deal marks a significant milestone for Nigeria’s neighbours, which defaulted on most of its external debt in December 2022 due to skyrocketing servicing costs. It also needs to reach an agreement with private bondholders on roughly $13 billion in international debt.
“This is a crucial step for Ghana’s economic recovery,” remarked analyst Kwame Addo-Yobo, attributing the positive sentiment to the news.
“With the IMF funds and World Bank contributions secured, Ghana has a firmer foundation to implement structural reforms and boost investor confidence.”
Ghana’s $3 billion IMF bailout, now entering its second tranche, is crucial for stabilizing the economy. But the road to recovery is not without hurdles.
Indeed, Ghanaian bonds reacted positively to the development, with the 2042 maturity gaining the most, climbing 0.82 cents to its highest level since early November. The news also triggered anticipation for an additional $550 million in World Bank funding, contingent on the IMF’s board approval.
China played a pivotal role in facilitating the debt deal, emphasizing its commitment to overcoming technical hurdles and facilitating consensus among creditors. “On January 8, China encouraged all parties to reach a basic agreement on Ghana’s debt settlement plan,” announced Chinese Foreign Ministry spokesperson Mao Ning, attributing the success to collaborative efforts.
Ghana’s ambitious debt restructuring plan, targeting $20 billion out of its $30 billion external debt under the G20’s Common Framework, aims to cut $10.5 billion from debt payments between 2023 and 2026. This, coupled with the expected influx of IMF and World Bank funds, provides much-needed breathing room for Ghana to stabilize its finances and reignite economic growth.
