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In a significant development, Ghana suspended, though it claims temporarily, the payment of part of its external debt, including Eurobonds on the plea that it is seeking to restructure the debt profile, after entering into an agreement with the International Monetary Fund (IMF)
In a significant development, Ghana suspended, though it claims temporarily, the payment of part of its external debt, including Eurobonds on the plea that it is seeking to restructure the debt profile, after entering into an agreement with the International Monetary Fund (IMF. The suspension will be applicable to certain categories of its external debt, according to Ghana’s Finance Minister Ken Ofori-Atta, while adding that the measure would help the country to prevent further deterioration of the economic, financial, and social situation of Ghana.
Ghana is facing a number of macroeconomic problems including steady instability of its currency -Cedi-which is presently reckoned as the weakest currency, taking the place of Sri Lanka’s rupee. Inflation is hovering at 50%, one of the highest in the world. Servicing the debt is entailing the commitment of all its state revenue. In short, the country is caught in a debt trap, and salvation from that requires deft handling of the economy. The unusual step being taken by the west African country, which will affect its sovereign rating, reflects the worst economic scenario in decades.
The suspension, according to the finance minister, is an interim emergency measure and covers a large part of the country’s external debt, Eurobonds, commercial term loans, and most of its bilateral debts. Types of external debts like the payment of multilateral debt and new debts contracted as of Monday are excluded from the suspension.
Ghana was rated as a well-performing country in Africa, having strong democratic institutions and comfortable foreign exchange reserves mainly due to its burgeoning commodity exports. The turning point of the downside performance of the economy was the Covid-19 pandemic and as of now the fallout of the Russia-Ukraine war. In the midst of these negative developments, the country cannot seek investments from abroad. The country’s president Nana Akufo-Addo turned to the IMF to avoid defaulting on his debt. However, he is still promising Ghana without aid, even as the country sinks into crisis and investors are turning away from it.
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The government signed a US$3 billion bailout agreement with the IMF, triggering a fear among citizens that the government would be forced to take several austerity measures as a pre-condition for availing of the loan from the IMF.
