Press spotlights call by IMF to assist Ghana shoulder its debt burden, others

APA – Accra (Ghana)
The reports that the International Monetary Fund (IMF) has doubled down on its plea to wealthier nations to support Ghana and other weaker economies to help such countries extricate themselves from the shackles of debt.
The Graphic reports that the International Monetary Fund (IMF) has doubled down on its plea to wealthier nations to support Ghana and other weaker economies to help such countries extricate themselves from the shackles of debt.
The call also comes at a time when the fund has seen a $1. 6 billion shortfall in its funding in the face of the seemingly global economic crises where funding to debt-distressed countries was at its highest.
Speaking ahead of the IMF and World Bank Spring Meetings in Washington, Kristalina Georgieva, IMF’s Managing Director said the fund and wealthier countries needed to make it easier for vulnerable ones to restructure their debts to help minimise the effects of the debt crises on lives and livelihoods of their people.
Developed economies must also commit more resources to the fund’s Poverty Reduction and Growth Trust (PRGT) – a concessionary lending window for low-income countries (LICs) – to help strengthen the global response to debt vulnerabilities, Ms Georgieva said in a curtain raiser speech before the meetings that opened yesterday, Monday, April 10.
The one-week meetings in Washington D.C. in the United States of America (USA) come off at a time when Low-Income Countries (LICs) are battling extreme debt pressures worsened by the COVID-19 pandemic and Russia’s invasion of Ukraine. Ghana, with a debt stock of GH$575.7 billion in November last year, is one of more than 10 LICs in debt distress.
The country defaulted in servicing its debt last year and is now working with bilateral creditors to restructure their component to be able to earn a US$3 billion IMF-assistance to help slowdown inflation, prop up the currency and return the economy to the path of growth.
Although discussions with some bilateral creditors under the G20 Common Framework are underway, talks with China, which holds US$1.9 billion of Ghana’s debts have dragged, fuelling doubts over the country’s ability to secure a package before May.
The newspaper says that the Paris Club, a group of bilateral creditors that helps with workable solutions to payment problems faced by debtor nations, will form an Official Creditor Committee this week to look into Ghana’s request for financial assurances.
The assurances, which come with debt restructuring and further strategic lending, will enable the country to present its programme to the International Monetary Fund (IMF) Board for approval.
The Minister of Finance, Ken Ofori-Atta, who disclosed this to the Daily Graphic in an interview, said the formation of the committee and the financial assurances were to enable the country’s programme to be laid before the IMF board shortly after the Spring Meetings.
The finance minister further stated that the country was firmly on course for IMF Board Approval.
Mr Ofori-Atta and the Governor of the Bank of Ghana, Dr Ernest Addison, are leading a high-level Ghana delegation to the World Bank and IMF Spring Meetings from April 10 to 16, this year in Washington D.C.
On the sides of the meetings, the delegation will meet with members of the Paris Club, China, and other bilateral creditors.
Among other agenda items at the Spring Meetings, Mr Ofori-Atta will chair the V20 Inter-Ministerial dialogue on green financing for climate vulnerable nations.
The finance minister will also attend meetings focusing on re-engineering the global financial architecture to promote geographical inclusion.
“During the World Bank and IMF Spring Meetings, we will be meeting with the Paris Club and other bilateral creditors.
They will also be meeting separately to consider Ghana’s request for financing assurances,” Mr Ofori-Atta indicated.
The minister added that China had indicated its intention to join the all-important meeting and this marked a significant step in our progress towards IMF Board approval.
“We are, therefore, expectant, optimistic and hopeful that the meeting would result in the formation of an Official Creditor Committee, and the provision of financing assurances to the IMF.
The Graphic also reports that Ghana’s banking sector is facing one of its worst times as the sector stares at unprecedented losses after the government restructured GH¢83billion (US$6.8billion) of local debt as part of a move to finalise a US$3billion bail-out from the International Monetary Fund.
According to the Bank of Ghana (BoG), developments in the banking sector are being broadly reflected by the challenging operating environment in 2022 on account of macroeconomic conditions and the recent implementation of the Domestic Debt Exchange Programme (DDEP) which all 23 universal banks participated in.
Based on December 2022 data, the central bank’s preliminary assessment of the DDEP’s impact on the banking sector, confirmed significant losses on account of impairment of banks’ holdings in Government of Ghana (GoG) bonds.
Although, the impact is been moderated by the introduction of some regulatory reliefs by the BoG as support similar to the reliefs provided to banks at the onset of the COVID-19 pandemic, the threats still lingers with some industry watchers fearing a number of developments thereof including fold-ups, forced mergers and or serious and heavy losses and in some instances, and drastic reduction in operational capital by close of the 2023 financial year.
It is feared that the worst to be hit in the melee may include local banks because of lack of capacity to raise funds to shore up their capital.
On the part of foreign subsidiary banks operating in the country, they are likely to be supported by their mother banks which have posted profits last year and will be willing to recapitalise their subsidiaries to enable them to stay in competition.
Some multinational banks with affiliates in Ghana have begun releasing their financials, announcing huge profits, a development which is positive for their subsidiaries.
For instance, United Bank for Africa (UBA) Plc posted a profit after tax of $378 million in the 2022 financial year, this represents a growth of 35.1 per cent compared to the $280.3 million recorded the year earlier.
The newspaper also says that the United States Treasury Secretary Janet Yellen will push for immediate action on requests by Ghana and Zambia for restructuring their sovereign debts during the 2023 Spring Meetings of the International Monetary Fund (IMF) and the World Bank this week.
“During the week, Secretary Yellen will also maintain urgency for the speedy resolution of Common Framework cases like Zambia and Ghana to remove debt overhangs and foster growth in developing countries. She will also stress the importance of concluding the debt treatment for Sri Lanka,” the Treasury said in a press release on Monday.
Ms Yellen will also advocate for speeding up the debt relief process and making it more transparent, according to the US Treasury.
A Treasury official said that it was uncertain whether there will be progress on Zambia’s request this week, as it depends on China. Yellen will discuss the debt issue with officials from the G20 group of major economies and the Global Sovereign Debt Roundtable separately.
A record number of developing nations are at risk of a debt crisis due to inflation, borrowing costs, the Russia-Ukraine war and a strong dollar.
Ghana’s President Nana Addo Dankwa Akufo-Addo was optimistic about concluding the ongoing negotiations with the International Monetary Fund (IMF) to get the support of the fund last March.
However, some critics including the Minority in Parliament have stated that the deal has not been concluded because the government has not been able to satisfy the financing assurances regarding the $3 billion IMF bailout.
GIK/APA