External debt restructuring: Deal with bilateral creditors next month
The government expects to formalise its agreement with the Official Bilateral Creditors (OCC) co-chaired by France and China in a memorandum of understanding (MoU) which is expected to be signed next month, Minister of Finance, Dr Mohammed Amin Adam, has disclosed.
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He said the OCC has shared the draft MoU with its member countries and would share the draft with the Government of Ghana later next month.
This will represent the final step in the country’s negotiations with the OCC to restructure bilateral debts of about $5.4 billion.
It would also enable the Executive Board of the International Monetary Fund (IMF) to sit in June to approve the second review of Ghana’s programme with the fund and unlock the third tranche disbursement of $360 million.
Following the formation of the OCC in May 2023, the Executive Board of the IMF approved Ghana’s three-year IMF programme and immediately released the first tranche of US$600 million to the country.
The second tranche of another US$600 million was hinged on the first review of the country’s IMF programme in October 2023.
On October 6, the IMF staff and the government reached a staff-level agreement on the first review. However, an Executive Board level approval which will trigger the release of the money was not possible until the government reached an agreement with the OCC in January.
Similarly, the government in April this year reached a staff level agreement with the IMF mission on the second review of the programme, but the release of the third tranche is now dependent on signing the MoU with the OCC.
“As far as the bilateral creditors are concerned, we know that we reached an agreement in January but we have to formalise the agreement through an MoU and the indication we have is that the OCC has shared the draft MoU with their members and about sharing the draft with the government later,” Dr Amin Adam said while addressing the media at the end of Spring Meetings in Washington.
“As soon as we get the draft and are fine with it, that will mean we have concluded that and this will be enough for the IMF board to approve our second review,” he added.
Commercial debt
On the commercial front, Dr Amin Adam, said the government has opened fresh talks with its Eurobond holders because the interim agreement that was reached falls short of the agreed debt to GDP ratio of 55 per cent of GDP target by one percentage points.
He said this was, however, an improvement over the deal that was reached in October last year as that fell short of the debt to GDP target by five percentage points.
The government in December 2022, announced a suspension on interest payments on its external commercial debts as it seeks to restructure debts of about 14$ billion, out of which $13 billion are in Eurobonds.
The government has since been engaging with its Eurobond holders as it pushes to get a deal that is consistent with the debt sustainability thresholds agreed under the IMF programme.
The Ministry of Finance in a tweet last week announced that it had reached an interim agreement with the Eurobond holders but noted that the agreement would have to be tweaked a little to meet the IMF thresholds.
Dr Amin Adam said the Eurobond discussions were still on course and gave an assurance that the government would reach a deal that was favourable and would reset the country’s debt profile.
“We have narrowed the gap between what we agreed with the bondholders and the IMF threshold but there is still more work to be done to reach a deal that is consistent with the threshold of the IMF.”
IMF assurance
At a press conference in Washington DC, the Director, African Department of the IMF, Abebe Aemro Selassie, said the fact that Ghana has not reached an agreement with the Eurobond holders would not prevent the fund from providing the country with more financing, although reaching that agreement is important.
He said the IMF was grateful that the government shared with them some of the terms that were under consideration.
“Staff has provided an input on whether these terms were consistent with programme parameters and the government has decided that they would not pursue this deal just yet.”
“Again, I think we are very hopeful that there will be movement and that they can reach agreement consistent with the programme parameters, helping lower Ghana's debt burden at the right level and avoiding people of Ghana having to make too much sacrifice,” he stated.
On the bilateral front, he said the IMF was confident that the government would sign the MoU soon.
“We know that there have been intensive discussions in recent weeks and those are continuing, and we are very hopeful that there will be agreement with bilateral official creditors.”
“To be clear, they have provided financing assurances though, and that remains in effect. And so, we are not envisaging that it will be an issue for our ability to conclude the next review and provide the disbursement that is pending,” he stated.