A senior IMF official has stated that the lack of a finalized debt restructuring deal between Ghana and its commercial creditors is not expected to prevent the disbursement of the impending second tranche of funds (US$360 million) under the US$3 billion Extended Credit Facility program.

Ghana successfully completed the second review under its IMF program in April, which clears the way for the release of an additional US$360 million.

Abebe Aemro Selassie, Director of the IMF’s African Department, provided an update on Ghana’s ongoing debt restructuring talks and their implications for the next disbursement from its US$3 billion extended credit facility during the release of the Regional Economic Outlook for sub-Saharan Africa.

“To be clear, they (Ghana’s creditors) have provided financing assurances, though, and that remains in effect. And so, we are not envisaging that it will be an issue for our ability to conclude the next review and provide the disbursement that’s pending,” Mr. Selassie stated.

“As we noted, we have reached staff level agreement and that’s by far the most important component for the review,” he added.

However, he emphasized the importance of securing agreements with bilateral and commercial creditors that align with the terms agreed upon in January 2024 for continued advancement.

“As of now, there is no MoU with bilateral creditors, but we know that there have been intense discussions in recent weeks and those are continuing and we are very hopeful that there will be agreement with bilateral official creditors,” he explained.

Regarding private creditors, including holders of Ghana’s Eurobonds, Mr.Selassie revealed that while the government had shared proposed restructuring terms with the IMF, “the government has decided that they would not pursue this deal just yet”.

He was optimistic that a resolution could be reached, saying: “Again, I think we’re very hopeful that there will be movement, and that they can reach agreement consistent with the programme parameters, helping lower Ghana’s debt burden at the right level and avoiding, of course, people of Ghana having to make too much sacrifice”.

“As of now, there is no MoU with bilateral creditors, but we know that there have been intense discussions in recent weeks and those are continuing and we are very hopeful that there will be agreement with bilateral official creditors,” he explained.

Regarding private creditors, including holders of Ghana’s Eurobonds, Mr.Selassie revealed that while the government had shared proposed restructuring terms with the IMF, “the government has decided that they would not pursue this deal just yet”.

He was optimistic that a resolution could be reached, saying: “Again, I think we’re very hopeful that there will be movement, and that they can reach agreement consistent with the programme parameters, helping lower Ghana’s debt burden at the right level and avoiding, of course, people of Ghana having to make too much sacrifice”.

The Ministry of Finance has acknowledged reaching an interim agreement with bondholders, though adjustments are required to meet the IMF’s debt sustainability goals. With a target of reducing external debt payments and interest costs by US$10.5 billion between 2023 and 2026, the government is focused on aligning strategies to achieve this aim.

Dr. Mohammed Amin Adam, the Finance Minister, stressed at a recent press conference that the government is determined “to achieve an agreement acceptable to all parties while adhering to the sustainability targets outlined in its IMF-supported economic programme”.

The ministry highlighted the country’s more ‘assertive approach’ over the past two months in talks with commercial creditors and Eurobond holders, while reiterating the importance of staying within the parameters of the IMF programme.

Mr. Selassie underscored the significance of concluding a debt restructuring deal, stating: “Why debt relief agreement is important is that it can bring about a bit more certainty in terms of the outlook for public finances. It also engenders some confidence in economies”.

The IMF official was, however, circumspect on providing a timeline, saying: “The negotiations take time and I am not sure I can give a timeline. This is something that is between Ghana and its creditors.”

The debt talks are occurring against a backdrop of increasing financial strains across sub-Saharan Africa, according to the latest Regional Economic Outlook report. The report warns that the region’s governments “continue to grapple with financing shortages, high borrowing costs and roll-over risks amid persistently low domestic resource mobilisation.”

It estimates that gross external financing needs for low-income countries will exceed US$70billion annually over the next four years. “The financing challenges are forcing countries to cut essential public spending and redirect development funds to debt service, thereby endangering growth prospects for future generations,” the report lamented.

While expressing optimism about Ghana’s restructuring process, Mr. Selassie acknowledged that debt negotiations are always “a very painful exercise, first and foremost, of course, for the debtor country; but also creditors”.