Ghana has taken a significant step towards securing much-needed debt relief as it receives a draft term sheet from official creditors, a development substantial enough to trigger the release of $600 million from the International Monetary Fund (IMF). The West African nation’s Finance Minister, Ken Ofori-Atta, revealed this promising development.
The draft term sheet emanates from the Paris Club Group of creditors, alongside new participants, including China. This achievement follows months of arduous negotiations aimed at restructuring a substantial portion of Ghana’s bilateral debt, amounting to as much as $5.4 billion. The IMF board is set to convene within a week to discuss the situation.
In an interview held in the capital city of Accra, Minister Ofori-Atta stated, “We are reviewing the draft term sheet,” while refraining from divulging specific details contained within the draft accord. He continued, “We need to scrutinize every clause, but in terms of the broad framework, all parties are in agreement, so it’s kind of a clearance to the fund. I’m hoping by tomorrow we would have finished, so that whatever needs to be done will be sent to the fund.”
Ghana initiated the restructuring of a significant portion of its public debt in December 2022, a crucial step in qualifying for a $3 billion extended credit facility program with the IMF. In May, when the country committed to the program, it received an initial disbursement of $600 million. Subsequent releases, however, hinge upon Ghana’s ability to meet debt-rework requirements and other performance benchmarks.
As of the end of September, Ghana’s public debt, excluding loans to state-owned enterprises, stood at 66.4% of the nation’s gross domestic product (GDP). This improvement was facilitated by the successful completion of a domestic debt reorganization. Investors involved in the process primarily experienced interest-rate reductions when they exchanged approximately 126 billion cedis ($10.5 billion) of local debt during the previous year.
Finance Minister Ofori-Atta also revealed that a memorandum of understanding with bilateral lenders could potentially unlock an additional $550 million in funding from the World Bank by the end of February. This promising development marks a significant step towards stabilizing Ghana’s economic outlook and bolstering its efforts to recover from the challenges posed by its debt burden.
