Ghana is in a critical stage of negotiating a debt restructuring deal with its external creditors, as the West African nation faces mounting economic challenges and a looming debt crisis.
The government has asked for a $5.4 billion relief package, which would include a moratorium on interest payments, a reduction in principal payments, and an extension of maturities, according to a finance professor at Andrews University in Michigan, USA, Williams Peprah.
Peprah, who spoke to GhanaWeb, a leading digital news platform in Ghana, advised the government to stick to its target amount and expedite the talks to avoid further damage to the economy.
“If you ask me, we may have to go in with a figure to negotiate. The $5.4 billion that we want, whatever cut-off point that is being approved, we should be able to convince these external creditors that the $5.4 billion is what will help our economy and help us to complete our restructuring program,” he said.
“Whatever cutoff date may be agreed by each party, whether the Paris club or China, the aim should be on the $5.4 billion. That should be the cut-off date,” he added.
Ghana is among several African countries that have sought debt relief from their creditors amid the coronavirus pandemic, which has worsened their fiscal and external positions.
The country has already received some $1.15 billion in funding from the International Monetary Fund and the World Bank, as well as a suspension of debt service payments from the G20 group of countries until June 2024.
However, the government is still in talks with its commercial and bilateral creditors, who hold about 50% of its external debt, to secure more favorable terms and avoid a default.
According to the Minister of Finance, Ken Ofori-Atta, he is confident that official creditors will agree on a memorandum of understanding in a meeting scheduled for Jan. 8, Bloomberg reported.
The minister said the completion of the external debt restructuring would improve the country’s debt trajectory and enable Ghana to reach its target of a 55% debt-to-GDP ratio by 2028.
Ghana’s total public debt has declined from 73.1% of GDP at the end of 2022 to 66.4% of GDP as of September 2023, according to the latest data from the Bank of Ghana.
However, the country still faces high risks of debt distress and low growth prospects, as it grapples with the impact of the pandemic and the aftermath of the 2023 general elections, which were marred by violence and legal disputes.
Source: GhanaWeb
