Both leaders acknowledged that delays in reaching an agreement with the OCC could pose some challenges to the economy, but noted that the consequences of not reaching a better agreement could be more dire. He therefore urged the government not to rush into forming any agreement.
Dr. Saeed Boakhi, economist and research director at the Institute for Fiscal Studies (IFS), said in an interview with Graphic Business newspaper: The government should not rush to secure any agreement. ”
“Extreme indebtedness is such a problem that we need to get a better deal than just a deal. So if you can delay negotiations and still get a good deal in the end, hurry up and save yourself money. “That’s better than getting a bad deal for them,” he said.
As of press time yesterday, the government was locked in a meeting with the OCC, co-chaired by France and China, aimed at restructuring US$5.4 billion of debt to bilateral creditors.
Finance Minister Ken Ofori-Atta said in an interview with Bloomberg that he is confident the government will soon reach an agreement with the OCC that will allow the IMF Executive Board to approve and release the $600 second tranche by January 25. He said he is doing so. $1 million from the $3 billion relief fund.
Following the establishment of the OCC in May 2023, the IMF Executive Board immediately approved a three-year IMF program for Ghana and immediately released an initial tranche of US$600 million to Ghana.
A further second tranche of USD 600 million was dependent on the first review of the country’s IMF program in October 2023.
On October 6, IMF staff and the government reached staff-level agreement on the first review. However, the government’s inability to sign a memorandum of understanding with the OCC precludes board-level approval to trigger the release of funds.
Mr. Ofori-Atta said in a media interview on November 30 that the government has completed all formalities regarding the fund, all documents have been distributed to each director and they are awaiting a formal response from the OCC. .
He said the OCC is considering the issue of deadlines and the impact on the respective credits granted by each country, and is confident that those analyzes will be completed by the first week of December 2023. .
He added that another issue is the comparability of treatment to ensure that all creditors are equitably affected.
debt forgiveness
Despite the challenges in securing an agreement with the OCC, Dr. Saeed Boakye said the government still needs to push for some debt forgiveness.
“The government has to make creditors understand that it is very important for the country to receive some form of debt relief. If these negotiations fail, the country will not be able to repay its debts and creditors will also We need to make them understand that it will affect them.
“Even if China takes a tough stance, we must emphasize it and support China with a commitment to take steps to ensure this never happens again,” he said.
pressure on the economy
Also, in an interview with Graphic Business newspaper, Eugene Bowell, an economist and lecturer at Academic City University, said that the government’s inability to reach an agreement with the OCC will put tremendous pressure on an already fragile economy. He said there was.
He said that with the second release of IMF funds still pending and the secondary market virtually non-existent after the domestic debt restructuring exercise, the government’s fiscal deficit will continue to be financed by the Treasury bill market. He said it was limited.
“With interest rates on Treasury bills so high, it’s only a matter of time before the Treasury bill market also collapses,” he said.
Bawele said the government was not fully aware of the kind of creditors it was dealing with in China.
“China is not a country that forgives debt. Check out countries like Zambia and Sri Lanka that have recently gone through the same process. China either extends the repayment period or lowers the interest rate they pay.
“Getting China to forgive debt is a very difficult deal. Therefore, the government’s attempts to get China to agree to debt forgiveness will have to be extremely persuasive,” he said. .
External debt reduction
The government aims to reduce external debt by USD 10.5 billion between 2023 and 2026 by involving external creditors, including bilateral and commercial debt, in debt restructuring.
The government announced the suspension of debt service on external commercial debt on December 19, 2022, and has been working with the government on debt restructuring since then.
The government is seeking a total debt restructuring of $14 billion, of which $13 billion is in bonds with external commercial creditors.
On the commercial side, the Finance Minister said in the last update that two bondholder groups have been formed, consisting of domestic and regional bondholders and international bondholders.
“We held discussions in good faith with both parties and shared illustrative debt restructuring scenarios in May.
“We have received resolution scenarios from both bondholder groups and plan to accelerate constructive dialogue in the coming weeks,” he said.
Under the IMF program, the country is expected to reduce its debt-to-GDP ratio from the current 93.5% to 55%.