Milestone agreement with Paris Club imminent

The nation’s journey to regain economic stability is approaching a crucial breakthrough, with significant progress reported in negotiations with external creditors.

Government appears close to finalising a deal with the Paris Club of bilateral creditors, potentially unlocking vital funds and paving the way for further financial support.

In a significant update, finance minister Ken Ofori-Atta confirmed earlier this week that government is anticipating reception of a draft term sheet from the Paris Club for restructuring its substantial US$4.5billion bilateral debt. This development, expected to be finalised imminently, signifies a watershed moment in the country’s persistent efforts toward debt restructuring.

The pending Paris Club agreement holds paramount importance for Ghana’s trajectory, as it serves as a prerequisite for the nation to proceed with the International Monetary Fund (IMF)’s US$3 billion Extended Credit Facility (ECF) programme. The initial IMF board meeting, slated for November 2023, had faced postponement due to pending external debt restructuring.

However, with the Paris Club deal on the horizon, approval from the IMF board is now anticipated within days; heralding the second disbursement of US$600million under the ECF programme.

Key figures have commended the country’s expeditious and resolute approach to addressing its debt challenges. Abebe Selassie, the IMF Africa Director, highlighted the country’s swift establishment of an official creditor committee – surpassing the pace observed in comparable cases such as Zambia.

This commendation underscores government’s proactive stance and unwavering commitment to achieving a prompt resolution.

The anticipated IMF board approval of the ECF review is poised to trigger additional financial support from the World Bank. The bank has committed to providing US$300million in budgetary support and an additional US$250 million toward the Financial Stability Fund.

These funds, expected before the conclusion of February 2024, are poised to serve as a substantial boost to Ghana’s foreign reserves and fortify exchange rate stability.

The positive developments have already resonated positively in the market. Ghana’s sovereign international dollar bonds experienced an upswing on Tuesday, reflecting heightened investor confidence in the nation’s improving economic prospects.

Analysts have stated that while some challenges persist, the nation’s moves in external debt restructuring signify a noteworthy turning point. The impending agreement with the Paris Club, coupled with anticipated backing from the IMF and World Bank, lays the groundwork for heightened economic stability, augmented foreign reserves and a more robust currency. This, in turn, is poised to elevate investor confidence and establish the bedrock for a sustained economic recovery.

As the country moves closer to finalising the Paris Club agreement and seeking IMF board approval in the upcoming weeks, recent positive developments encourage optimism – an indication that the economy is going in the right direction to surmount its debt challenges and forge a more sustainable future.

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