The International Monetary Fund’s executive board on Wednesday approved a $3 billion, three-year loan program for Ghana, allowing for an immediate disbursement of about $600 million and a potential path out of the West African country’s worst economic crisis in a generation.
The IMF said in a statement that securing timely debt restructuring agreements with external creditors would be essential to successfully implement the Extended Credit Facility loan aimed at helping Ghana overcome immediate policy and financing challenges.
The Fund also said the new loan would help mobilize additional external financing from development partners and provide a framework for completing its debt restructuring.
“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.
Georgieva said the commitment by official bilateral creditors to help make Ghana’s debt sustainable signals important progress for the long-stalled G20 common framework for developing country debt relief.
Sources familiar with Ghana’s new program cautioned that authorities there faced long negotiations with creditors, pointing to Zambia, where a similar process has been mired in delays.
Ghana’s official sector creditors formed a committee co-chaired by China and France and agreed to debt restructuring talks, the Paris Club of Creditors said last week.
This paved the way for a sign-off on the IMF loan, which was agreed at the staff level in December.
“The next step is for the Official Creditor Committee… to agree with the authorities the specific modalities of how official creditors intend to deliver debt relief consistent with Fund-program parameters,” the IMF said on its website, adding that authorities were also engaging with private creditors to seek relief on their external debt.
Ghana faces a debt overhaul after its already strained finances buckled under economic fallout from COVID-19 and Russia’s invasion of Ukraine.
It is negotiating its international debt rework under the Group of 20’s Common Framework platform and completed a domestic debt exchange this year.
Some $5.4 billion of debt to official creditors has been earmarked for restructuring, according to government data, as well as $14.6 billion owed to private overseas creditors.
Zambia, the first African country to default in the COVID-19 era, secured an IMF loan in September 2022 and still has not agreed debt restructuring terms with creditors.
Analysts expect Ghana’s process to be faster and smoother since China holds a smaller proportion of Ghana’s debt. China is Zambia’s largest bilateral creditor and has been accused of delaying that country’s debt restructuring, which it denies.