Ghana expects help from the IMF
2022.12.07 10:37
Ghana expects help from the IMF
Budrigannews.com – A finance ministry official stated on Wednesday that the International Monetary Fund (IMF) team’s departure next week without a staff-level agreement could delay and complicate Ghana’s economic recovery efforts.
Ghana hopes to negotiate a debt relief package before the end of the year to help it overcome its worst economic crisis in a generation. An IMF team is in the country until Tuesday.
On Monday, Ghana made the announcement that it would exchange its domestic debt in the hope that doing so would aid in restoring macroeconomic stability.
Samuel Arkhurst, director of the Treasury and debt management, told reporters on Wednesday that the IMF had “nothing to do” with Ghana’s decision to restructure its domestic debt.
A request for comment was made, but the IMF did not immediately respond.
Earlier, Arkhurst told Reuters that the consequences for those who do not participate voluntarily in the domestic bond exchange were still being negotiated, but there were no plans to go to parliament and force domestic bondholders to participate.
Arkhurst told reporters, “We will be in trouble if the holdouts are large.”
A slide that was shown at the briefing stated, “The government reserves the right to ensure that non-tendered eligible bonds do not benefit from their non-participation to the Domestic Debt Exchange, including through additional regulatory measures or a more coercive approach.”
Arkhurst stated that a bank recapitalization will undoubtedly occur, and the central bank is currently negotiating with commercial banks regarding its form.
Additionally, on Wednesday, the Bank of Ghana announced that it would establish a financial stability fund with a target size of 15 billion cedis, or $1.20 billion, to provide liquidity to financial institutions that fully participate in the debt exchange.
Arkhurst stated that the World Bank had accepted a contribution to the fund and that other international financial institutions would follow suit once an agreement with the IMF was reached.
By 2028, the oil, gold, and cocoa producer in West Africa wants to reduce its debt-to-GDP ratio from 100% to 55% because interest payments have increased to 70% to 100% of revenues while the cedi has fallen and inflation has skyrocketed.
The cedi has lost more than 50% of its value this year, but after the latest IMF staff visit was announced last week, it showed signs of recovery. The currency was trading at 12.50 to the dollar on Wednesday, down from 14.00 a week earlier, according to data from Refinitiv Eikon.
According to the most recent figures released by the central bank last month, public debt was 467.4 billion cedis, or $48.9 billion, in September. Of that amount, 42% was domestic debt.
Ghana is likewise wanting to trade neighborhood dollar greenbacks, cocoa bills, and homegrown non-attractive obligation at a “later stage”, the money service said.
In a Q&A statement, the finance ministry said that domestic non-marketable debt and cocoa bills would be exchanged “under comparable terms” to the domestic bond restructuring that was announced on Monday. However, it did not provide any additional information.
The government of Ghana also intends to restructure its foreign debt, including $13 billion in Eurobonds that have been trading at deeply distressed levels of less than 50 cents on the dollar for months. However, the proposals for this restructuring have not yet been presented.
