Ken Ofori-Atta
GOVERNMENT HAS announced a suspension of all debt service payments under certain categories of the country’s external debt, pending an orderly restructuring of some affected obligations.
This suspension covers the payments on Ghana’s Eurobonds; commercial term loans; and on most of the bilateral debt.
According to the Ministry of Finance, the suspension would “not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after December 19, 2022 or debts related to certain short term trade facilities.”
It also mentioned, “We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors.”
The ministry continued that, “Government stands ready to engage in discussions with all of its external creditors to make Ghana’s debt sustainable through a fair, transparent and comprehensive debt restructuring exercise in line with international best practices,” adding the Ministry of Finance would hold an investor presentation at a date to be announced, at a later stage.
Explaining why it was embarking on such a course, government said “Ghana, was today, faced with major economic and financial crisis, and its attendant social challenges.”
“In 2020 and 2021, the COVID-19 pandemic negatively impacted our fiscal and economic situation. Global risk aversion triggered large capital outflows, a loss of external market access and rising domestic borrowing costs.
“This year, 2022, the global economic shock induced by the Russian invasion of Ukraine has further adversely affected our economy just when it was beginning to recover from the pandemic. The combination of adverse external shocks has exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget. These factors taken together have put the sustainability of our debt at risk,” it added.
It said it was to address the mounting challenges, that “we launched on Monday, December 5, an invitation to exchange our domestic debt. The details of this domestic debt exchange are set forth in an Exchange Memorandum, available on https://mofep.gov.gh/news-and-events/debt-operations. This domestic debt operation is part of a more comprehensive agenda to restore public debt sustainability.”
It further said given the magnitude of the economic and social crisis that Ghana was confronted with, the domestic debt operation would not be enough to close the large financing gaps that Ghana faced over the coming years, adding that government’s Debt Sustainability Analysis (DSA) had demonstrated that “our public debt, both external and domestic, is unsustainable.”
“We, therefore, formally requested IMF assistance in July 2022. A Staff-Level Agreement (SLA) has subsequently been achieved and announced on December 13 on a financing programme aimed at restoring macroeconomic stability and debt sustainability, and preserving financial stability while protecting the most vulnerable.
“This SLA milestone was achieved in record time. It is with this same spirit that we, therefore, expect creditors to also respond in an expedited manner, to ensure that the IMF-supported programme is adopted by the IMF Board as soon as possible in early 2023.
“In the interim, additional emergency measures are necessary to prevent a further deterioration in the economic, financial, and social situation in Ghana. As it stands, our financial resources, including the Bank of Ghana’s international reserves, are limited and need to be preserved at this critical juncture,” it noted.