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Ghana, official creditors close to MoU on debt restructuring

Published

6 months ago

June 9, 2024

According to two individuals quoted by Reuters, Ghana and its official creditors have resolved the main points of a debt restructure and will shortly sign a draft memorandum of agreement, which is a crucial step needed to obtain further financing from the International Monetary Fund (IMF).

The document formalizes a tentative agreement to restructure $5.4 billion in debt that was made in January with government creditors, including China and France. The West African country is attempting to navigate its way out of the worst economic crisis in a generation.

Establishing an MoU will enable the IMF executive board to convene and authorize the $360 million payment under Ghana’s $3 billion rescue plan, which is anticipated to take place later this month.

One person with knowledge of the situation stated that all significant difficulties had been resolved and that the only remaining steps were to finalize some precise wording. The sources stated that the agreement was likely to be signed in a few days. An inquiry for comment was not immediately answered by a representative for Ghana’s Finance Ministry.

Amid skyrocketing servicing expenses, Ghana defaulted on the majority of its foreign debt in December 2022, following Zambia into post-COVID default. Remaining in default makes it more difficult for the government to get outside financing and escape a dire economic situation.

Ghana, like Zambia, agreed to undergo debt treatment under the G20 Common Framework, a procedure meant to speed up debt restructurings and include China, the newest major bilateral lender, in the process. Earlier this week, bondholders in Zambia approved the restructuring after the southern African copper miner missed payments due to the COVID-19 outbreak.

The World Bank and other international organizations, as well as creditors, are keen to hasten Ghana’s debt restructuring and believe that the country’s nearly four-year-long, erratic struggle out of default offers valuable lessons for Ghana.

In addition to restructuring the majority of its domestic debt, Ghana must also come to an understanding with the holders of over $13 billion in foreign bonds.

Ghana’s national debt-to-GDP ratio was expected to decrease by 15% between 2023 and 2028. According to this estimate, the percentage will have decreased annually for six years, reaching 69.96% in 2028.

The majority of the country’s foreign debts were not repaid by December 2022 because the costs had risen too high. However, it now needs to negotiate a settlement with individuals who own foreign bonds worth roughly $13 billion. The majority of its domestic debt has also been modified.

Related Topics:debt rework Featured Ghana

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IMF mission concludes 4th loan program assessment in Egypt

Published

2 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.