Ghana’s bilateral lenders are discussing the formation of an official creditor committee, a first step needed to engage in debt relief talks for the crisis-hit country, according to two sources with direct knowledge of the matter.
The Paris Club of creditor nations has contacted other bilateral creditors, such as China and India, to engage in forming the committee and deciding who would chair it, one of the sources said.
“Hopefully, it should be resolved soon,” a second source added, without providing further details on the timing.
The West African country in January became the fourth nation to apply to the common framework platform, an initiative of the Group of 20 major economies launched in 2020 to streamline debt restructuring efforts for poorer countries.
China is Ghana’s single biggest bilateral creditor with $1.7 billion of debt, while Ghana owes $1.9 billion to Paris Club members, according to data from the Institute of International Finance (IIF).
Chinese lending represents around 80% of non-Paris Club debt. The country’s total external debt is $28.4 billion.
The government decided to restructure its domestic debt in December, and after five extensions, they announced on Tuesday that they have received support from 80% of creditors.
Also, the largest holders of Ghana’s overseas debt formed a creditor group in December for debt rework talks with the government. The country’s dollar-denominated debt amounts to more than $13 billion, across maturities ranging from 2023 to 2061, according to Refinitiv data.
COMMON FRAMEWORK TALKS
Ghana’s decision to suspend overseas debt payments in late 2022 reflects the parlous state of its economy. Inflation has soared to a 21-year peak in 2022, while several steep interest rate hikes failed to check rising prices. The government rushed to secure a $3 billion staff-level agreement with the International Monetary Fund (IMF) in December which is still pending board approval.
An official creditor committee is a key step for Ghana to formally seek financing assurances from bilateral creditors stating they are willing to enter a debt rework process. Without these assurances, the IMF’s executive board would delay the programme’s approval and, in consequence, money disbursements.
The nation has said it hopes for a rapid debt overhaul, though other countries undergoing common framework treatment have faced slow progress.
Zambia – Africa’s first COVID-19 pandemic-era sovereign default – requested common framework treatment in February 2021 but the committee was only formed last May when creditors agreed that China and France would be co-chairs. The first meeting of the group was held in June, though there is still no resolution.
Chad became the first country to ask for a debt overhaul under the common framework in January 2021, but a deal was reached only in November 2022 without providing debt relief.
Ethiopia’s efforts to negotiate its debt with bilateral creditors under the G20 platform have been delayed due to the civil war there, and the country is now engaging with the IMF on a formal programme amid a peace deal. As in Zambia, Ethiopia’s creditor committee is co-chaired by China and France.
Source: Reuters
