The International Monetary Fund (IMF) has given its approval to Ghana’s request for a $3 billion bailout package to be dispensed over the next three years. This decision has been taken to buttress the West African country’s economic recovery efforts amidst a mounting debt crisis.
Following an Executive Board meeting on Wednesday, the IMF revealed plans for an immediate payout of roughly $600 million.
Ghana is currently undergoing a debt restructuring process under the G-20 Common Framework, a measure deemed necessary to secure the IMF program. The framework aims to facilitate better coordination between traditional sovereign creditors, like the Paris Club, and newer ones such as China, which is now the leading lender to emerging nations.
Countries like Zambia and Ethiopia are also engaging the framework in efforts to restructure their liabilities after their economies suffered the brunt of the Covid-19 pandemic and the Russian-Ukrainian conflict.
In order to secure the IMF package, Ghana had to make hard economic choices which included raising taxes and inflicting losses on domestic investors. This backing came in the wake of the country securing financial assurances from a group of bilateral creditors co-chaired by China and France.
The loan is expected to replenish Ghana’s foreign-exchange reserves, which have plummeted almost 50% from their peak in August 2021. The central bank had been using these reserves to prop up the cedi. As part of its recovery strategy, Ghana has suspended most of its external debt payments since December and has plans to renegotiate with eurobond holders on how to restructure the $13 billion debt owed to private investors.
The IMF noted that “securing timely debt restructuring agreements with external creditors will be essential” for the successful implementation of the recovery program.
Looking ahead, Mohammed Amin Adam, Minister of State for Finance, revealed that the government anticipates a further $600 million disbursement in November. The remaining balance will likely be disbursed in equal instalments of $350 million every six months, subject to IMF reviews.
The Ghanaian government is also in talks to secure an additional $900 million budget support from the World Bank over a three-year period.