Ghana clinched financing assurances from a bilateral creditors group that China and France are co-chairing, paving the way for the International Monetary Fund’s board to approve a $3 billion bailout.
The official creditors committee formally constituted Friday, and its members are committed to negotiating with Ghana terms of a restructuring of their claims to be finalized in a memorandum of understanding, the group said in a statement. IMF Managing Director Kristalina Georgieva welcomed the statement.
“This statement provides the necessary financing assurances for the IMF Executive Board to consider the proposed fund-supported program and unlock much-needed financing from Ghana’s development partners,” she said.
The country’s dollar bonds maturing in 2032 rose 0.8 cents to 37.9 cents on the dollar on Friday, the highest since February. Dollar notes maturing in 2027 increased 0.9 cents to 38.4 cents on the dollar.
Ghana is using the Group of 20’s so-called Common Framework to restructure its debt. The mechanism seeks to improve coordination between the traditional Paris Club of sovereign creditors and new ones like China, now the biggest lender to emerging nations. Zambia and Ethiopia are also using the framework to revamp their liabilities.
The government has also taken tough economic decisions including increasing taxes and rescheduling payments on domestic loans.
Ghana owes bilateral debt of $1.9 billion, a fraction of its total public liabilities of 575.7 billion cedis ($53 billion) at the end of November. The nation has yet to announce its proposed restructure terms for as much as $13 billion in eurobonds.
While bilateral and commercial debt holders are encouraged to agree to similar terms under the G20 framework, Ghanaian Finance Minister Ken Ofori-Atta has warned private lenders to brace for more losses than bilateral creditors.
“There’ll be burden-sharing all around,” Ofori-Atta said in a presentation at the IMF Spring Meetings in April. “If you join us in this, you really will help us build a robust economy and come back and be able to resume our partnership with you and the markets.”
In its statement, Ghana’s creditor committee said it “encourages multilateral development banks to maximize their support for Ghana to meet its long-term financial needs.”
In Zambia’s case, China has pushed for international financing institutions including the World Bank to provide increased funding to the government. The more concessional loans and grants that multilateral banks provide the government, the smaller the financing gap. That ultimately means creditors need to provide less debt relief.
The IMF is already updating its macro framework and debt sustainability analysis to reflect greater funding from the World Bank and African Development Bank to Zambia, which could reflect a smaller funding gap than the $8.4 billion the fund identified last year.