Ghana’s official creditors are set to gather on Monday to discuss the restructuring of approximately $5.4 billion in loans to the country, according to information from three sources reported by Reuters. This meeting is considered a crucial step in securing the next tranche of funding from the International Monetary Fund (IMF).
The Official Creditor Committee (OCC), co-chaired by the governments of China and France, represents bilateral lenders holding about a quarter of Ghana’s $20 billion external debt earmarked for restructuring.
The primary focus of the meeting is expected to be reaching an agreement regarding a “cut-off date.” This date signifies the point after which new loans from bilateral creditors will not be subject to restructuring. Defining this date has presented challenges for Ghana in its debt restructuring efforts.
Sources with knowledge of the matter mentioned that there are differing preferences among creditors regarding the cut-off date. Some advocate for December 31, 2022, as the cut-off date, citing Ghana’s default earlier in that month. However, others argue for March 24, 2020, which corresponds to the initiation of the Group of 20’s debt service suspension initiative (DSSI) aimed at assisting the world’s poorest countries amid the COVID crisis. Ghana did not participate in the DSSI.
In preparation for the January 8 OCC meeting, the Paris Club, a group of major creditor nations excluding China as a permanent member, is set to convene on Friday. The Paris Club has shared a technical note on Ghana with other bilateral creditors and multilateral lenders, proposing December 2022 as the cut-off date, according to sources.
“Ghana is still about cut-off date, but creditors haven’t agreed yet,” the source said. “If the cut-off date is agreed, that means an agreement on debt restructuring is close.”
The spokesperson for the Paris Club declined to comment on meetings that have yet to take place, and as of now, there has been no immediate response from Ghana’s finance ministry regarding the matter.
Ghana, a West African country known for its production of gold, cocoa, and oil, is in need of reaching an agreement on debt restructuring with its official creditors. This agreement is crucial for obtaining approval from the International Monetary Fund (IMF) executive board for the next disbursement of $600 million from a $3 billion rescue loan. The IMF requires assurances that debt relief is being implemented by bilateral creditors in alignment with the IMF program.
Ghana initiated the request for bilateral debt restructuring under the Common Framework, a process established by the G20 leading economies during the COVID-19 pandemic. The country faces a significant economic crisis marked by soaring inflation and escalating government debt servicing costs.
Simultaneously, Ghana is engaged in discussions with overseas bondholders to restructure its international debt exceeding $13 billion. Notable global asset managers such as BlackRock, PIMCO, Vontobel, AllianceBernstein, and Neuberger Berman are among the holders of these bonds.