Gov’t Announces External Debt Payment Suspension
The government of Ghana has announced a suspension of payment for external debt under certain categories.
The suspension which has been announced days after the announcement of a domestic debt exchange offer is meant to bring the country’s debt to sustainable levels.
The suspension will affect Eurobonds, commercial term loans, and Ghana’s bilateral debt.
The Finance Ministry notes that the suspension is pending an orderly restructuring of the affected obligations.
“This suspension will not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022 or debts related to certain short-term trade facilities.
“We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors.”
The Ministry noted that the government is ready to engage all of its external creditors to make Ghana’s debt sustainable through a fair, transparent and comprehensive debt restructuring exercise in line with international best practices.
The Ministry of Finance is therefore expected to hold an investor presentation later.
The Ministry blamed the unsustainable level of the country’s debt on the COVID-19 pandemic and the Russia-Ukraine war.
“Ghana is today faced with a major economic and financial crisis and its attendant social challenges. In 2020 and 2021, the covid-19 pandemic negatively impacted our fiscal and economic situation. Global risk aversion triggered large capital outflows, a loss of external market access and rising domestic borrowing costs.
“This year, 2022, the global economic shock induced by the Russian invasion of Ukraine has further adversely affected our economy just when it was beginning to recover from the pandemic. The combination of adverse external shocks has exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget. These factors taken together have put the sustainability of our debt at risk.”
Ghana’s debt as of the end of September 2022 stood at GH¢467,371.31 million (US$48,871.34 million) according to provisional results. A debt sustainability analysis by the Finance Ministry showed that Ghana’s debt is unsustainable.
According to Finance Minister Ken Ofori Atta, the domestic debt exchange programme will handle 137 billion of the country’s domestic debt to get the country’s debt at a sustainable level.
But in its recent communique, the Ministry noted that the domestic debt exchange programme of the government is not enough to save the country from a debt default.
The adoption of a suspension of debt payment, the Ministry said, is meant to preserve the financial resources of the country including the Bank of Ghana’s international reserves.
Source: opemsuo.com/Hajara Fuseini
