Ghana gains China and Paris Club support for IMF bailout?
China and the Paris Club have both offered their support to Ghana in its request for assistance from the International Monetary Fund (IMF), according to a joint statement released by the Creditor Committee on 12 May 2023. The committee, comprising countries with eligible debt claims on Ghana, has been officially established and is expected to be co-chaired by China and France.
The committee examined Ghana’s macroeconomic and financial situation, including its long-term debt sustainability, and has expressed support for Ghana’s proposed IMF upper credit tranche (UCT) program to address its urgent financing needs. The committee has also encouraged Multilateral Development Banks (MDBs) to provide support to Ghana to meet its long-term financial requirements.
Creditor committee members have committed to negotiating with Ghana on the restructuring of their claims, to be finalized in a Memorandum of Understanding (MoU) in accordance with the “Common Framework for Debt Treatments beyond the DSSI”.
The committee has stressed that the Ghanaian authorities are expected to seek debt treatments on terms that are at least as favorable as those being considered by the creditor committee from private creditors and other official bilateral creditors, in accordance with the principle of comparability of treatment.
The committee has urged private creditors and other official bilateral creditors to commit to negotiations with Ghana without delay to ensure the full effectiveness of the debt treatment under the Common Framework.
The joint statement further emphasized that the restructuring of Ghana’s debt must be consistent with the sustainability of its external debt and economic growth objectives. The creditor committee also acknowledged the efforts made by the Ghanaian authorities to address the challenges posed by the COVID-19 pandemic and highlighted the need for continued support to promote a sustainable and inclusive recovery.
The establishment of the creditor committee and its expression of support for Ghana’s request for assistance from the IMF and other financial institutions represents an important step towards the country’s efforts to address its debt sustainability challenges. Ghana’s debt-to-GDP ratio has risen sharply in recent years, reaching around 80% by the end of 2022, largely due to the impact of the pandemic on the country’s economy.
The Common Framework for Debt Treatments beyond the DSSI provides a mechanism for eligible countries to seek debt relief from their creditors in a coordinated and transparent manner. The framework was endorsed by the G20 in 2020 and has since been endorsed by the Paris Club and other creditor groups.
As Ghana continues to navigate its debt sustainability challenges, the support of its creditors will be critical to its economic recovery and future growth prospects. The establishment of the creditor committee and its endorsement of Ghana’s request for assistance from the IMF and other financial institutions is a positive development that underscores the importance of international cooperation and coordination in addressing the global debt crisis.
