Finance Minister lists 4 benefits of Ghana's debt-restructuring in mid-year budget review
In his address to Parliament on Tuesday, July 23, Finance Minister Dr. Mohammed Amin Adam outlined the significant progress and benefits of Ghana's debt-restructuring efforts as part of the 2024 mid-year budget review.
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Dr. Adam highlighted the successful negotiations with the Official Creditor Committee (OCC), which resulted in an agreement in principle on January 12, 2024, and a subsequent Memorandum of Understanding (MoU) on June 11, 2024. This MoU covers the restructuring of approximately $5.1 billion of official bilateral debt.
"This agreement has provided debt service relief amounting to $2.8 billion over the course of the IMF programme period from 2023 to 2026, offering critical liquidity support," Dr. Adam reported. The MoU will now guide the amendment of individual country claims, with direct engagements with bilateral creditors being the next critical step.
The Finance Minister also detailed an agreement reached with Eurobond holders on June 24, 2024, to restructure around $13.1 billion of outstanding Eurobonds. This agreement reduces the nominal value of the Eurobonds by $4.7 billion and provides $4.4 billion in debt service relief during the programme period.
Dr. Adam emphasized that the debt restructuring initiative is set to reduce the present value of Ghana's public debt to 55 percent by 2028, in alignment with the IMF-supported PC-PEG programme. He noted that the government remains committed to engaging in good-faith negotiations with other commercial external creditors to ensure a comprehensive and sustainable approach to Ghana's external debt obligations.
Reflecting on the broader impact of the debt restructuring, Dr. Adam highlighted four key benefits:
1. Rapid Restoration of Macroeconomic Stability and Debt Sustainability: The restructuring efforts have been crucial in stabilizing Ghana's macroeconomic environment and ensuring the sustainability of its debt.
2. Avoidance of Steeper Fiscal Adjustment: By restructuring its debt, Ghana has been able to avoid more severe fiscal adjustments that could have negatively impacted the economy.
3. Creation of Fiscal Space for Development Spending: The debt relief has created additional fiscal space, allowing the government to allocate resources towards development spending and growth-enhancing initiatives.
4. Prevention of a Domestic and External Banking Crisis: The restructuring has helped avert a potential banking crisis, both domestically and externally, thereby safeguarding the financial sector.
Dr. Adam concluded by emphasizing the importance of exercising caution and learning from past experiences. "Despite the benefits, we remain committed to exercising caution, informed by the lessons learned from our experiences and the sacrifices of every Ghanaian. Our debt strategy going forward includes deepening reforms to ensure irreversibility and building buffers to reduce vulnerabilities and enhance resilience," he stated.
