President Nana Addo Dankwa Akufo-Addo has said Ghana’s arrangements with the IMF will not immediately turn the country’s fortunes overnight but will put it on the path to recovery.
Imperatively, President Akufo-Addo said that given the extent of the fiscal and debt sustainability issues currently being addressed, fiscal adjustments and structural reforms are not sufficient for the restoration of the country’s debt sustainability.
However, with fiscal discipline, he said, the country would regain the trust and confidence of business partners and the investor community, which invariably would give the government, the space to continue with productive plans and policies.
Delivering the State of the Nation Address (SONA) on the floor of Parliament on Wednesday, President Akufo-Addo said the 3-year IMF Programme, anchored on Government’s Post COVID-19 Programme for Economic Growth (PC-PEG), aims at restoring macroeconomic stability and debt sustainability whilst protecting the vulnerable.
The President stated that the government is on track for the IMF Staff to present Ghana’s Programme request for a US$3 billion Extended Credit Facility to the IMF Executive Board by the end of the month after reaching the Staff Level Agreement on December 12, 2022, following five months of talks.
He said the 3-year IMF programme, is a strong reform one, which relies on frontloaded fiscal measures to increase domestic resource mobilisation and streamline public expenditures to support inclusive growth and enhance social protection.
A critical component of the measures, he indicated, which the government is implementing to address the country’s current economic crisis, is the debt operation, involving both domestic debt and external debt.
The debt operation, the President told Parliament, is aimed at returning the country to debt sustainable path by 2028–reducing the debt-to-GDP ratio on a general classification basis and, in present value terms, from 103% in 2022 to 55% by 2028; and reducing the external debt service-to-revenue ratio from 29% in 2022 to 18% by 2028.
To achieve these goals, he said, a decision was taken to execute a Domestic Debt Exchange Programme (DDEP), in addition to fiscal adjustment, external debt operation and structural reforms.
The participation rate DDEP of 85% representing tendered bonds of GH¢83 billion out of the total eligible bonds of GH¢97,749,624,691, according to President Akufo-Addo, constitutes significant success for the Programme.
The GH¢83 billion bonds that were successfully tendered, also, representing 64% of the outstanding domestic debt stock of GH¢130 billion at the end of December 2022, as pension funds, had been expressly exempted from the DDEP.
President Akufo-Addo thanked organised labour, pensioners, pension fund managers, the Ghana Association of Banks (GAB), Ghana Securities Industry Association (GSIA), Ghana Insurers Association (GIA), the Individual Bond Holders and Retirees Forum, and all others who had contributed to make the Domestic Debt Exchange Programme a success.
Since Ghana’s external debt service suspension was announced by the government on 19th December 2022, President Akufo-Addo said significant progress has been made with its external debtors.
Ghana, according to the International Institute of Finance, owes about $13 billion of Eurobonds and $4 billion to bilateral loans as of September 2022, of which $1.7 billion is owed to China alone.
The suspension of the country’s external debt obligation, according to the government, is an interim emergency measure toward a comprehensive external debt operation which will contribute to the restoration of Ghana’s debt sustainability in line with its request for debt treatment under the G20 Common Framework.
President Akufo-Addo express his appreciation to members of the Paris Club and China for the cooperation so far exhibited to “us in attempting to reach an agreement, and in their attempt to establish an Official Credit Committee.”
“We look forward to their fast-tracking the needed financing assurances for IMF approval. We are confident that, with their cooperation, we will reach our March deadline for going to the Fund.”
“Mr Speaker, we remain resolute in our vision to restore macroeconomic stability and promote inclusive growth,” he ended.
Rex Mainoo Yeboah, ISD
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