The German Finance Minister, Christian Wolfgang Lindner, has pledged unwavering support for the establishment of a Ghanaian creditor committee at the Paris Club, in an effort to cope with restructuring the nation’s debt.
At a press briefing following engagements with Minister of Finance Ken Ofori-Atta in Accra, the German Finance Minister expressed a need to quicken formation of the creditor committee for Ghana.
“I hope that an international creditors’ committee under the current framework can be formed soon. I would like to call on all creditors to join the efforts as swiftly as possible; and to be frank, I remind China of its responsibilities as a very important bilateral creditor to Ghana as I already have on the international level on occasion – for example, in the last IMF meeting,” he said.
Ghana became the fourth country after Chad, Ethiopia and Zambia to request a restructuring of debt it owes to other governments under a G20 Common Framework. The programme, which was launched in 2020, seeks to streamline the process of coordinating among creditor governments and the restructuring of low-income countries’ debts after the COVID-19 pandemic.
He further emphasised the country’s need to return to the international financial markets, saying: “Ghana should keep its credibility with the international financial markets, and we have to take this into account when it comes to restructuring the sovereign debt.
“It is furthermore important that the economy comes back to the growth path, and the role of private sector banks must not be underestimated. We have to consider which way it will be possible to restructure the sovereign debt that is held by bilateral creditors and domestically,” Mr. Lindner said.
Government has reached a Staff Level Agreement (SLA) with the IMF that spells out measures which will put the fiscal space on a path of consolidation. Consistent with the SLA is the 2023 budget that was recently passed by Parliament.
Emphasising the need for fostering policy reforms, the German Finance Minister said: “We cannot only focus on debt restructuring without fostering the policy reforms you have already introduced, so we have to apply fiscal measures in your budget, macro-economic recovery and debt operations. Only the three of these together will bring Ghana back to sustainable economic development over the next few years”.
Calling on all creditors, the minister added that it is essential to see a fair-sharing among all creditors: “This is why we need the creditor committee as soon as possible, in which China has to participate”.
Revenue-enhanced measures such as the VAT increase of 2.5 percent, the complete removal of benchmark values on imports and review of the E-levy should help improve the revenue outlook. On the expenditure side, the lower capping on transfers to earmarked funds from 25 to 17.5 percent and a reduction of budgetary allocation to goods and services, as well as rationalisation of executive compensation, should help contain expenditures in 2023.
“We have a vital interest in the success of Ghanaian politics. We want to see West Africa as a whole stay stable. We are interested in the economic well-being of Ghana. We know that there are opportunities across this country: it has dynamism and we really appreciate the efforts government has made over the last year; extending human capital and focusing on improving social mobility in society,” he added.
Responding to assurances from his German counterpart, Ken Ofori-Atta expressed delight with the European nation’s support.
“We are now in the middle of an IMF programme, and that is going to require the support of Germany in a number of ways. Firstly, to support us – as Christian mentioned – in the creditor committee issue at the Paris Club to accelerate their decision-making process; and support at the IMF board to make sure that in March 2023 we get approval.
“And then, specifically, also looking at challenges coming with the debt exchange programme so that we will be able to establish a financial stability fund – to really ensure that even in this austerity mode, there will be a group agenda which supports banks to make sure SME lending and growth is maintained during the period,” Mr. Ofori-Atta said.
