Govt, IMF negotiations take off

Stéphane Roudet, IMF Mission Chief to Ghana

Stéphane Roudet, IMF Mission Chief to Ghana

Ghana and the International Monetary Fund (IMF) on September 26 opened formal negotiations for an economic programme, necessary to forestall a debt default and stabilise the economy in the short-to-medium term.

It followed the arrival of an IMF delegation, led by the Mission Chief to Ghana, Stéphane Roudet, in Accra over the weekend.

The team will be in the country between now and October 7, a statement from the IMF said.

Reforms and policies

The negotiations with the government team are meant to determine the form that an economic stabilisation programme, which will be the country’s 17th with the fund since 1957, should take and when it can kick off.

It would also explore the nature of the policies, reforms and programmes that the loan support should entail.

The results of the negotiations will form the basis for a staff decision on Ghana’s economic support request, which will then be submitted to the IMF Executive Board for consideration.

Challenges

The negotiations come at a time when the economy is facing one of its worst challenges in recent times.

Last Friday, Fitch Ratings downgraded the economy to CC from CCC, which is the country’s worst rating ever. At CC, it means that the country’s debts are extremely speculative, according to the grading list for sovereign ratings.

Fitch said the downgrade followed “increased likelihood that Ghana will pursue a debt restructuring given mounting financing stress.”

It said with surging interest costs on domestic debt and a prolonged lack of access to Eurobond markets, there was a high likelihood that the IMF support programme currently being negotiated would require some form of debt treatment due to the climbing interest costs and structurally low revenue as a percentage of gross domestic product (GDP).

“We believe this will be in the form of a debt exchange and will qualify as a distressed debt exchange under our criteria,” Fitch said.

Request

The government approached the IMF for support in July this year after mounting debts in the midst of weak revenues fuelled by large fiscal deficit, rising inflation, a weakening currency and a general hike in cost of living.

Following the approach, a fact-finding team from the fund arrived in July for discussions with the government after which it called for a debt sustainability analysis (DSA).

Although the results of the DSA are yet to be known, Graphic Business understands that the fund has asked the government to consider a debt restructuring with its creditors to help bring the debt to sustainable levels, necessary for a fund programme to begin.

Duration

According to the Finance Minister, Ken Ofori-Atta, President Nana Addo Dankwa Akufo-Addo wants a deal on the IMF support concluded by December to allow for a quicker recovery of the economy.

Discussions and negotiations for the country’s most recent IMF programme in 2015 took around seven months to conclude

It is believed that the country could get up to $3 billion to soar up its reserves and also open up access to the international capital market for lending.

The country was locked out of the market this year over the high debts.