Dr. Ernest Addison, Governor-Bank of Ghana, has emphasised the importance of strengthening multilateral coordination and regulatory efficiency for sovereign debt resolution in low-income countries (LICs) through the creation of a robust Global Sovereign Debt Roundtable (GSDR).
Speaking during the IMF-African Caucus Meeting at the World Bank/IMF Meetings in Marrakech, Morocco, Dr. Addison underscored the significance of this initiative.
“We call for a carefully designed debt resolution mechanism, especially for vulnerable members with large domestic creditors – such as Ghana, to help avert domestic financial market instability,” Dr. Addison stated in his address to attendees at the conference.
He further highlighted the need for revamping the G20 Common Framework (CF) to ensure a more timely, orderly, equitable, inclusive and transparent debt restructuring process for distressed members in the region; including Ghana, Ethiopia and Malawi.
Dr. Addison stressed the importance of these reforms as African economies grapple with acute debt challenges exacerbated by various factors – including the COVID-19 pandemic, the Ukraine conflict, tightening global financing conditions and climate-related disasters. Public debt in sub-Saharan Africa (SSA) has now reached levels not seen since the early 2000s, placing a significant burden on member-countries.
In this challenging environment, Dr. Addison urged the IMF to play a crucial role in providing support to vulnerable African economies. “A much stronger IMF support would be crucial amid the current challenging global environment,” he emphasised.
To address these pressing issues, Dr. Addison presented several recommendations for consideration: including the IMF adapting its lending toolkits to changing global conditions; and aligning PRGT access thresholds with those of the GRA to ensure uniformity of treatment. This move would make it easier for vulnerable members facing acute debt challenges to access adequate Fund support.
The Governor called on the Fund to relax the PRGT eligibility criteria, making it easier for vulnerable PRGT-eligible members to receive support. He also suggested reducing, suspending or entirely eliminating surcharges for these members.
Dr. Addison stressed the importance of securing additional pledges from willing donors to close the resource gaps in PRGT, reinforcing the IMF’s finances while protecting the quota share of vulnerable members.
Dr. Addison emphasised the importance of deepening the Fund’s tailored capacity development and surveillance support, in collaboration with other international partners, to address member-specific bottlenecks and restore public debt sustainability.
These recommendations come at a critical time, when over half of SSA members are at high risk of debt distress and the region’s economic growth is projected to further decelerate in 2023. The Governor’s proposals aim to provide immediate relief to struggling economies and foster inclusive and sustainable growth in the region.
The call for a stronger GSDR and enhanced cooperation between the IMF, MDBs and RDBs also reflects the urgency of addressing current global economic challenges which impact low-income countries.
