President Nana Akufo-Addo has assured that government has made significant progress in its external debt negotiations since announcing an external debt service suspension on December 19, 2022 for certain categories of external debt.
This suspension was an interim emergency measure toward a comprehensive external debt operation, which will contribute to the restoration of Ghana’s debt sustainability in line with the country’s request for a debt treatment under the G20 Common Framework.
“We are also making progress on the external debt negotiations since government announced an external debt service suspension on December 19, 2022 for certain categories of external debt to ensure an orderly restructuring,” the president said in his State of the State Address to parliament in Accra.
External debt was US$29.2billion at the end of November 2022, according to central bank data.
The president expressed his appreciation to members of the Paris Club and the Peoples’ Republic of China for the cooperation they have exhibited so far in attempting to reach an agreement and establish an official credit committee. The president also expressed his confidence that, with their cooperation, Ghana will reach its March deadline for going to the Fund.
“Concluding arrangements with the International Monetary Fund (IMF) will not restore our fortunes overnight, but it will set us on the road to recovery. With fiscal discipline we will regain the trust and confidence of our business partners and the investor community, which will give us space to continue our productive plans and policies,” the president said.
The president also briefed parliament on the progress of talks with the IMF since the announcement on July 1, 2022 of Ghana’s intention to engage it for a bailout programme. The 3-year IMF programme, anchored on government’s post-COVID-19 Programme for Economic Growth (PC-PEG), aims to restore macroeconomic stability and debt sustainability while protecting the vulnerable.
Having reached a Staff Level Agreement on December 12, 2022 – after five months of intense negotiations and completion of most prior actions required under the agreement – the country is on course for IMF staff to present the Bretton Woods institution’s Executive Board with Ghana’s request for a US$3 billion Extended Credit Facility by the end of March 2023.
The president stated that given the extent of fiscal and debt sustainability issues Ghana is addressing, fiscal adjustment and structural reforms are not sufficient for restoration of debt sustainability. A critical component of measures being implemented by the country to address its current economic crisis is the debt operation involving both domestic and external debt.
“We remain resolute in our vision to restore macroeconomic stability and promote inclusive growth,” he said.
The debt operation is aimed at returning the country to a debt-sustainable path by 2028 by reducing the debt-to-gross domestic product ratio on a general classification basis, and in present value terms from 103 percent in 2022 to 55 percent by 2028; and reducing the external debt service-to-revenue ratio from 29 percent in 2022 to 18 percent by 2028.
To achieve these goals, the decision was taken to execute a Domestic Debt Exchange Programme (DDEP) in addition to fiscal adjustment, external debt operation, and structural reforms. The participation rate of 85 percent, representing tendered bonds of GH¢83billion out of the total eligible bonds of GH¢97.75billion constitutes significant success for the DDEP.
The GH¢83billion bonds that were successfully tendered also represent 64 percent of the outstanding domestic debt stock of GH¢130billion at the end of December 2022, as pension funds have been expressly exempted from the DDEP.
The president thanked parliament for its support throughout this process, including the passage of key revenue laws. He however said a few more of these measures – namely the Income Tax (Amendment) bill, Excise Duty and Excise Tax Stamp (Amendment) bills, as well as the Growth and Sustainability Levy bill – are outstanding and need urgent attention and passage by the legislature to complete the prior actions.