As the nation attempts to close its enormous balance of payments imbalance, Ghana has halted payments on the majority of its external debt, virtually defaulting.
On Monday, the country’s finance ministry said that it will stop paying back all of its debts, including its Eurobonds, commercial loans, and the majority of bilateral loans. Calling the decision a “interim emergency action,” some bondholders criticised the decision’s lack of clarity.
According to the finance ministry, the government “stands ready to engage in discussions with all of its external creditors to make Ghana’s debt sustainable.”
The suspension of debt payments is a reflection of the economy’s precarious position, which prompted the government to reach a $3 billion staff-level agreement with the IMF last week (IMF).
Ghana previously declared a domestic debt swap programme and stated that creditors were negotiating an external restructure. A comprehensive debt restructuring is a need for IMF funding, according to their statement.
Since the beginning of the year, the nation has struggled to refinance its debt due to downgrades by numerous credit rating agencies on worries that it wouldn’t be able to issue fresh Eurobonds.
As a result, Ghana’s debt is now even more troubled. According to Refinitiv Eikon data, the public debt as of September was 467.4 billion Ghanaian cedis ($55 billion), of which 42% was domestic.
In September, Accra’s balance of payments deficit was over $3.4 billion, down from a surplus of $1.6 billion at the same period last year.
While servicing the debt presently consumes 70 to 100% of government earnings, the country’s inflation rate soared to as much as 50% in November.
Some claim that Ghana is currently going through its worst economic crisis in a generation.
More than a thousand demonstrators marched through Accra, the nation’s capital, last month, demanding the president’s resignation and criticising IMF agreements as the price of food and fuel skyrocketed.
At the end of September, it had gross international reserves of around $6.6 billion, or less than three months’ worth of imports. This is a decrease from $9.7 billion at the conclusion of the previous year. The suspension, according to the administration, will not apply to payments for multilateral debt, brand-new loans obtained after December 19 or loans for certain short-term trade facilities.
Reuters news agency received confirmation from holders of Ghana’s international bonds late on Monday that a creditor committee had officially been established to help with the “orderly and thorough resolution” of the nation’s financial problems.
The creditor committee stated that any good faith negotiations would have to refrain from unilateral acts and necessitate the prompt exchange of comprehensive economic and financial data between international bondholders, the government, and the IMF.
