The Paris Club’s formation of an Official Creditor Committee (OCC) has given impetus to the nation’s efforts to restructure its debt and finally secure a US$3billion facility from the International Monetary Fund (IMF), following a staff-level agreement that was reached on December 12, 2022.

The OCC, which is composed of representatives from countries to which Ghana owes a debt, expressed support for the country’s proposed IMF upper credit tranche (UCT) programme and its swift adoption by the IMF Executive Board. In a communique last Friday, the Committee – co-chaired by China and France – also encouraged multilateral development banks (MDBs) to provide maximum support for Ghana to meet its long-term financial needs.

Reacting to the development, Managing Director of the Fund, Kristalina Georgieva, welcomed the OCC, expressing the importance of an IMF-supported economic programme and their commitment to negotiate debt restructuring terms accordingly.

“This statement provides the necessary financing assurances for the IMF Executive Board to consider the proposed Fund-supported programme and unlock much-needed financing from Ghana’s development partners,” she said

She also endorsed a call by the Official Creditor Committee for private creditors and other official bilateral creditors to commit to comparable debt treatments.

“The Creditor Committee’s action recognises the Ghanaian authorities’ strong reform programme, which aims to restore macroeconomic stability and debt sustainability while laying the foundation for an inclusive recovery. It also signals that further progress is being made under the G20 Common Framework, demonstrating that international partners are ready to work together on helping countries resolve their debt issues. This is vital to enable countries such as Ghana to achieve sustainable growth and poverty reduction,” she added.

However, the Head of Insights at IC Group – a securities firm, Courage Martey, in a tweet cautioned that securing financing assurance from official creditors is not the final step in debt-restructuring. The next phase will involve critical negotiations with creditor committees, wherein Ghana will present its proposed terms to bring its debt and debt service metrics to IMF targets in present value terms. The creditors may agree or disagree, but a deal must be reached before the IMF can approve the next disbursements.

According to Martey, once financing assurance is secured and the IMF programme is approved to begin, the success of debt restructuring will determine progress on the programme and additional disbursements under the US$3billion facility. Martey added that debt restructuring is one of the torturous parts of the IMF deal and a crucial factor in Ghana’s ability to achieve debt sustainability.

“Securing financing assurance from official creditors is not a done deal for debt restructuring. It is not the only requirement for Ghana to secure IMF board approval for the programme to start. The next phase will be critical. Actual negotiations with creditor committees will begin with government presenting its proposed terms, which will ensure it brings debt and debt service metrics to the IMF targets in present value terms,” he explained.

“The creditors may agree or disagree but a deal needs to be agreed upon before IMF reviews can be approved for the next disbursements. Once financing assurance is secured and the IMF programme is approved to begin, the progress on the programme and additional disbursements under the US$3billion will depend on the success of debt restructuring, which is one of the torturous parts of the IMF programme based on debt restructuring,” the economist added.

The creditor committee noted that Ghana has taken steps to address its challenging macroeconomic and financial situation, including implementing a strong reform programme. The committee expressed confidence in Ghana’s ability to successfully implement its reform program and achieve debt sustainability.

It also urged private creditors and other official bilateral creditors to commit to negotiating such debt treatments with Ghana, which are crucial to ensure full effectiveness of the debt treatment for Ghana under the Common Framework for Debt Treatments beyond the DSSI.

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