With a debt deal nearly done, Ghana’s government now has to meet IMF targets to access credit facility
Ghana has taken another key step towards stabilising its economy after its parliament approved a debt restructuring deal on 24 June with 25 creditor nations, including China, France, Britain, Germany and the United States.
Under the restructuring terms, which were agreed in March, and are worth US$2.8 billion in debt relief, debt service payments due between 20 December 2022, and 31 December 2026 will be rescheduled and repaid from 2039 to 2043.
Getting the deal with sovereign creditors over the line has been tortuously slow, and leaves the US$2.7 billion arrears to private creditors as the final hurdle facing President John Dramani Mahama’s government. That will involve negotiations with about 60 commercial banks.
However, forecasts from officials in Accra that these negotiations could be concluded by the end of June have proved to be optimistic.
Completion of the debt restructuring should guarantee access to further tranches of a US$3billion credit facility spread over three years – from 2024 to 2026, with more than half already disbursed – as agreed with the International Monetary Fund in 2023, though to meet the IMF’s criteria Mahama’s government still has to cut inflation and the budget deficit while raising revenues.
But the lesson from Zambia, which agreed its own debt restructuring deal worth US$13.4 billion in October 2023, is that debt relief does not spell the end of budget challenges. Finance Minister Situmbeko Musoketwane announced on 26 June that the Treasury would borrow an additional US$624 million from the domestic market to cover a bigger-than-expected shortfall in this year’s budget. Like Ghana, Zambian President’s Hakainde Hichilema’s government is expected by the IMF, with whom its 38-month loan facility ends in October, to increase revenues.
