Ghana’s official creditors are set to convene in a crucial meeting to hash out the terms of restructuring $5.4 billion in loans, a pivotal step towards securing the next tranche of International Monetary Fund (IMF) aid. This comes at a critical juncture for the West African nation grappling with a burgeoning debt crisis and spiraling inflation.
The bilateral lenders, including China and France, who jointly chair the Official Creditor Committee (OCC), hold a quarter of Ghana’s $20 billion external debt slated for restructuring. The meeting’s focus falls on establishing a “cut-off date” – the demarcation point beyond which new loans won’t be eligible for restructuring. Finding consensus on this date has become a major roadblock for Ghana’s debt rework efforts.
Some creditors, notably those aligned with China, push for December 31st, 2022, as the cut-off, citing Ghana’s default earlier that month. However, others advocate for March 24th, 2020, aligning with the G20’s Debt Service Suspension Initiative (DSSI) launch date – an initiative Ghana ultimately opted out of.
Ahead of the OCC meeting, the Paris Club of major creditor nations, excluding China, will convene on Friday to discuss the issue further. Sources indicate the group favors December 2022 as the cut-off. Yet, a definitive agreement remains elusive.
“Ghana is still wrangling over the cut-off date,” said a source close to the negotiations. “But once settled, it paves the way for a comprehensive debt restructuring deal.”
The Paris Club declined comment on upcoming meetings, and Ghana’s finance ministry remains unresponsive to requests for clarification. Securing an agreement with official creditors is paramount for Ghana to unlock the next $600 million installment from its $3 billion IMF rescue package. The Washington-based lender requires assurances of debt relief from bilateral creditors aligned with its program.
Ghana’s economic woes stem from a deep crisis characterized by runaway inflation and surging debt servicing costs. In a bid to alleviate the pressure, the country petitioned for bilateral debt restructuring under the G20’s Common Framework a year ago. Additionally, it’s engaged in separate negotiations with overseas bondholders to restructure over $13 billion in international debt, involving major asset managers like BlackRock and PIMCO.
The January 8th meeting stands as a critical juncture for Ghana’s debt saga. Reaching a consensus on the cut-off date could signify a major step towards financial stabilization, while its protraction risks further impeding Ghana’s path to economic recovery.
