3 hurdles to clear this week for IMF board to approve $3bn bailout

For the Board of the International Monetary Fund (IMF) to approve Ghana’s $3 billion bailout at the end of this month, Ghana needs to achieve three critical milestones this week.

Ghana has started to actively engage external debtors with the view to getting debt cancellation, especially from the Paris club of creditors.

The first stop of a government delegation seeking debt restructuring will be in China as that country holds $1.7 billion out of Ghana’s $5.7 billion bilateral debt.

Delegation to China

Finance Minister, Ken Ofori-Atta left Accra yesterday leading a high-powered government delegation to China to negotiate for the acceptance of the country’s proposal for debt cancellation with the Paris club.

The delegation will hold discussions with officials of the finance ministry of China, the central bank of China, and China’s Eximbank, principally over how to cross the debt restructuring line with China, ideally as part of the common framework with the Paris Club, which also includes Russia.

The Chinese who are not members of the Paris Club have so far dragged their feet.

Other non-member creditors like Saudi Arabia and India on the other hand, are expected to join the Paris Club meetings.

Delegation to meet Paris Club in France

From China, the delegation will travel to Paris in France to hold discussions with the Paris Club tomorrow, Tuesday, March 21, 2023.

That meeting is most critical in determining how quickly Ghana can secure the IMF deal.

In January, all member countries of the G20 group of economic powers said they are on board for a restructuring of Ghana’s debt and Paris Club members are ready to take the first step toward forming a creditor committee.

The work of the Committee will, typically, take about three weeks.

Tuesday’s meeting will set the ball rolling and give Ghana the greatest indication yet as to how quickly the anticipated IMF deal can be closed.

Forming a creditor committee took a couple months for previous cases, however the official said the Paris Club members were all ready to do so for Ghana and hoped it could be done in a month.

The official said Ghana’s case was less complex than Zambia, whose case the official said was progressing after struggling since it became the first African country to default after the pandemic.

The programme, which was launched in 2020, was supposed to streamline the process of coordinating among creditor governments the restructuring of low-income countries’ debts after the pandemic.

However, progress has proven glacial for the first cases; a situation Western countries say is in part due to a lack of restructuring experience by China, a non-Paris Club G20 creditor that has become a major lender in recent years.

 3 Bills Parliament must pass

On Thursday Parliament will vote on three key revenue bills which must be passed to indicate Ghana’s seriousness and doing better than being below the continental average on revenue mobilisation.

The bills are the Income Tax (Amendment) Bill, the Excise Duty & Excise Tax Stamp (Amendment) Bills and the Growth and Sustainability Levy Bill.

The passage of these bills and a successful meeting with the Paris Club are the most crucial things the IMF Board will require to approval the deal for Ghana.

Ghanaians now can only wait and see the timetable to be set by the 22-member nations Paris Club, which holds majority of the country’s bilateral debts.

But, Ghanaian officials have been having prior engagements with the creditor nations involved, why should all help speed up the process.

Ghana hopes Ofori-Atta’s trip can help get China to join the Paris Club meetings, which will agree on a common framework for all its member creditors, including Belgium, UK, USA, Japan, Denmark and the Netherlands.

Alternatively, failing which, Ghana can do a separate bilateral deal with China, but on similar principles of restructuring. That is also at the heart of the Ghanaian delegation’s business in China this week. The team should return next Sunday.

Parliamentary action

The nation’s fate after the successful implementation of the Domestic Debt Exchange Programme is also now heavily dependent on Parliament who meet this Thursday 23 March to vote on the three revenue bills.

Members of Parliament from the National Democratic Congress caucus have been directed by the NDC secretariat to vote against the three bills.

Minority Leader, Cassiel Ato Forson last week  suggested that the seeming delay in agreeing on a debt restructuring deal with China is what could kill the IMF deal but was silent on the bills the House is required to pass.

The China factor

Ofori-Atta who left Accra Sunday afternoon will first stop over in Addis Ababa, Ethiopia, to attend the African Finance Ministers’ meeting, which will revolve around the continent’s suffocating debts.

He will meet United Nations Economic Commission for Africa (UNECA) as well, again on concerns over Africa’s growing indebtedness, especially since Covid-19.

Negotiation with external creditors

Negotiations with Eurobond holders are said to have been significantly smoothened since the successful completion of the Domestic Debt Exchange Programme (DDEP) and   in principle, a  framework of a deal with holders of  Eurobond has been fashioned out.

Ghanaian officials have met with all executive directors of the IMF, including Germany, the United Kingdom, France, Japan, and the USA.

Ghana will most likely be looking after the Spring Meetings of the IMF and World Bank in Washington DC, which will take place from April 10 to 16 2023, for the IMF Executive Board.

The IMF and Ghana reached a staff-level agreement on the U$3 billion loan deal in December 2022. Ghana was expected to conclude its domestic debt restructuring by end of January but that was also delayed due to an understandable struggle with bondholders and their representatives on the nature, structure and scope of the domestic debt exchange exercise.

The decision by the Paris Club to only now meet on Ghana has also meant that the IMF deal will have to wait for the work of the Paris Club’s Creditors Committee to be completed on the common framework first.