The International Monetary Fund approved Ghana’s request for a $3 billion bailout over three years to support the debt-ridden nation’s recovery.
The West African economy will receive an immediate disbursement of about $600 million, the IMF said in a statement Wednesday following an Executive Board meeting. Bloomberg reported the decision earlier in the day, citing people familiar with the talks.
Ghana’s cedi has become the world’s best performer against the dollar over the past six months as investors bet the nation was on the brink of securing the IMF funding. The currency traded 1.7% stronger at 10.86 per dollar by 8:30 p.m. in the Ghanaian capital, Accra. The country’s eurobond maturing in 2032 rose 0.4 cent to 40.9 cents on the dollar.
Read More: Ghana’s Cedi Becomes World Beater on IMF Bailout Approval Wagers
“We are proud to be partners with Ghana in addressing the difficult economic and financial conditions the country is facing,” IMF Managing Director Kristalina Georgieva said in a video posted on her Twitter handle. “Today’s decision is also a major milestone for the G-20 Common Framework.”
Ghana is restructuring its debt under the framework as part of measures to secure the IMF program. 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 try and revamp their liabilities after their economies were ravaged by the effects of the COVID pandemic and the Russian-Ukraine war.
Bilateral creditors agreement to help make Ghana’s debt sustainable “signals important progress” in framework, Georgieva said.
Tough Decisions
Ghana took tough economic decisions, including increasing taxes and imposing losses on domestic investors, to secure the package from the IMF. The fund’s backing came after the country last week clinched financial assurances from a bilateral-creditors group that’s co-chaired by China and France.
“Our strong growth and reform program, coupled with this IMF deal, firmly positions Ghana towards a resilient recovery,” Ghana’s Finance Ministry said in a post on Twitter.
The loan will help replenish Ghana’s foreign-exchange reserves, which have dropped almost 50% from a peak in August 2021 as the central bank used them to defend the cedi. The country suspended payments on most of its external debt in December, even as it plans to start negotiations with eurobond holders to restructure $13 billion of debt owed to private investors.
“Securing timely debt restructuring agreements with external creditors will be essential” for the implementation of program, the IMF said in Wednesday’s statement.
Fund Disbursements
Minister of State for Finance Mohammed Amin Adam said earlier this week the government expects a further $600 million disbursement in November. The remainder is likely to be lent in equal portions of $350 million every six months, subject to IMF reviews, he said.
The government is also in talks for an additional $900 million of budget support from the World Bank over a three-year period, even as it plans to start negotiations with eurobond holders to restructure $13 billion of debt owed to private investors.
--With assistance from Moses Mozart Dzawu.
(Updates with official IMF statement from second paragraph, and IMF and Ghana government tweets)
