The Extended Credit Facility loan, intended to assist Ghana address immediate policy and funding issues, must be implemented successfully, according to the IMF, which stated in a statement that achieving prompt debt restructuring agreements with external creditors would be vital, as per a report by American news agency, Reuters.
The Fund also stated that the new loan would create a framework for completing its debt restructuring and would aid in securing additional external finance from development partners.
"Congratulations to Ghana for a strong program of reforms to revitalize growth and reduce the country's debt burden," IMF Managing Director Kristalina Georgieva said in a video posted to Twitter.
According to Georgieva, the G20's long-stalled common framework for developing nation debt relief has made significant progress with the official bilateral creditors' promise to help Ghana make its debt manageable.
Recall that since 2022, Ghana has relentlessly sought a $3 billion relief fund from the International Monetary Fund. However, the IMF held off on disbursing the loan, insisting that the country come up with a sustainable debt restructuring plan before it could release such an amount.
This back and forth between the West African gold coast and the global lender constituted a roadblock for Ghana’s economic recovery from one of the worst economic crises the country has faced in decades. Ghana’s inflation hit its highest point in the last year, and its Cedi was ranked as the worst-performing currency in the world.
The country’s administration, through this tumultuous period strongly believed that the $ 3 billion loan from the IMF would help mitigate this crisis, while the people disagreed, citing that the last thing the country needs is to incur more debts.
Additionally, in a separate report, Ghana relayed its plans to restructure its debt, seeking a $10.5 billion reduction in the amount of external debt service from 2023 to 2026. Although Ghana's debt is now unsustainable, the nation hopes to reduce its risk of financial distress to a "moderate" level by 2028, according to the fund.
After its already fragile finances collapsed amid the economic effects of COVID-19 and Russia's invasion of Ukraine, Ghana is restructuring its debt. It concluded an internal debt swap earlier this year and is now requesting relief from foreign debt under the Common Framework program of the Group of 20.
The World Bank is slated to contribute $1.6 billion in budget and balance-of-payments support to Ghana, which the IMF estimates has a $15 billion funding deficit in its balance of payments from 2023 to 2026. According to the IMF, Ghana must aim to reduce its public debt-to-GDP ratio from 88.1% by the end of 2022 to 55% by 2028 since the nation has a medium "debt carrying capacity."
