As discussions with the International Monetary Fund for financial assistance continue, Ghana's rising public debt stock has grown to be a source of serious concern.

The IMF team visited Ghana in recent weeks to conduct a debt sustainability review and determine the level of the nation's debt.

But the IMF might not give the government financial support if the debt load is determined to be unsustainable.

As a result, the government may have to take into account debt restructuring, a step that many have already suggested as a remedy for the nation's significant debt problems.

What is debt restructuring

According to Investopedia.com, debt restructuring is a process used by companies, individuals, and even countries to avoid the risk of defaulting on their existing debts, such as by negotiating lower interest rates.

Instead of waiting to go bankrupt, most institutions are advised to restructure their debt in a manner that gives them a longer duration to pay their debts or makes them less expensive.

Usually, when an agreement to restructure is reached, the lenders either decide to reduce the interest rates on loans or extend the due dates for the repayment of the credit facilities.

This gives the country or business ample time to pay their loans and avoid bankruptcy.

Also, when debts are restructured, it makes it less probable to default on loans as payment becomes more flexible.

In Ghana’s case, debt levels have been on the rise as inflationary pressures, coupled with a deteriorating exchange rate have caused Ghana’s debt to plummet to GH¢402 million as of July 2022.

However, even though experts have noted that a restructuring may be the country’s best option, they have also explained that this may have grave effects on domestic investors.

A ‘haircut’ policy on the other hand is a debt restructuring method where the remainder of the debt is written off or the interest rates are reduced to make them less expensive.

Other types of debt restructuring include Debt-for-equity swap and Issuing callable bonds.