External debt overhaul key to stability - Finance Minister

Finance minister Ken Ofori-Atta has emphasised the importance of a successful external debt restructuring in restoring economic stability.

Government has presented various scenarios to the Official Creditor Committee (OCC) and Paris Club secretariat, aiming to pave the way for an agreement in principle followed by a formal memorandum of understanding (MoU) ratifying the debt treatment agreement.

Among the proposed scenarios is an ambitious 30 to 40 percent reduction in commercial debt, which has raised concerns among investors. Mr. Ofori-Atta, presenting these scenarios while addressing key investor stakeholders on the state of the economy, outlined a comprehensive plan that not only includes substantial debt reduction but also seeks to limit coupon rates to 5 percent and restrict final maturities to 20 years on bonds issued as part of the rework for US$13billion of outstanding international debt.

“Successful completion of the external debt restructuring exercise is crucial for Ghana,” the minister stated.

He defended the proposal, saying: “The scenarios have been carefully considered and are meant to facilitate productive discussions. We expect these treatment terms to align with the IMF’s classification of our debt as sustainable”.

Mr. Ofori-Atta emphasised that reaching an agreement with bilateral creditors is essential for IMF board approval. In May, an Official Creditors Committee (OCC) was formed under the G20 common framework – co-chaired by France and China – with the OCC committed to providing financial assurances to ensure full financing for the IMF programme.

To ensure debt sustainability, Ghana aims to reduce its debt-to-GDP ratio below 55 percent by 2028 in present value terms; lower the standard of service to revenue ratio; and close any outstanding financing gaps. These efforts are projected to reduce government debt from 109 percent to 72 percent of GDP by 2028, requiring a 17 percent relief from other creditors.

Mr. Ofori-Atta highlighted the significant progress made in technical discussions and ongoing negotiations with the OCC, expressing hope for an agreement with bilateral creditors in the coming weeks – ideally, before the IMF board meeting scheduled for November.

The finance minister also disclosed the formation of two other groups comprising domestic and regional bondholders and international bondholders.

He noted that progress made in the domestic debt exchange programme signals a turning point in Ghana’s financial recovery. “The effort made by domestic debt-holders, including the Bank of Ghana, has been significant; and this is now a thing of the past,” Ofori-Atta stated.

He expressed hope that all parties will reciprocate government’s commitment and join in the effort to restore economic stability.

The finance minister reported that the domestic debt exchange program (DDEP) has been successfully completed, resulting in reduced coupon rates and lengthened maturities.

These changes are expected to provide government with additional financial space and set the domestic debt-to-GDP ratio on a clear downward trajectory. Mr. Ofori-Atta expressed gratitude for the widespread participation in these exchanges, and clarified that the DDEP will not be reopened.