Strains in debt workouts drive Africa’s push to fix Common Framework

By Joshua Worlasi AMLANU, Washington D.C
[email protected] / [email protected]

African policymakers are intensifying calls for reforms to the global sovereign debt restructuring system, urging the International Monetary Fund(IMF) to address persistent delays and coordination failures under the Common Framework, even as recent cases such as Ghana’s highlight both its potential and its limitations.

The push gained momentum at the African Consultative Group meeting during the 2026 IMF/World Bank Group Spring Meetings, where finance ministers and central bank governors warned that the current system risks prolonging debt crises at a time when growth is projected to slow, as headwinds from external shocks are intensifying. A joint statement issued by Seedy Keita, Chairman of the African Caucus and Kristalina Georgieva, Managing Director of the IMF said global growth is projected to ease to 3.1 percent in 2026 and 3.2 percent in 2027, with risks tilted to the downside if geopolitical tensions persist.

The outlook is more constrained for African economies. Growth is expected to slow to 4.2 percent in 2026 from 4.5 percent in 2025, reflecting tighter financial conditions, elevated debt service burdens, and limited access to affordable financing. The statement noted that spillovers from the war in the Middle East are adding pressure through higher inflation, weaker external balances and risks of supply chain disruptions.
In view of this, policymakers are placing renewed emphasis on improving the efficiency and predictability of sovereign debt restructuring processes.

Pressure to fix debt resolution system
Speaking at the same meeting, Dr. Johnson Pandit Asiama, Governor of the Bank of Ghana said the scale and persistence of overlapping shocks require a more decisive response from the IMF.
“There is an urgent need to fix the sovereign debt resolution system,” he said, calling for time-bound restructuring processes under the Common Framework and stronger enforcement of comparability of treatment across creditor groups, including private lenders.
He added that IMF programme design should better distinguish between delays caused by creditor coordination failures and those arising from policy slippages, to avoid penalising countries implementing adjustment measures.

The Governor’s statement reflects the broader concerns among African policymakers that the current framework places a disproportionate burden on debtor countries while leaving key aspects of creditor participation uncertain.
Ghana’s case: Faster progress, structural constraints
Ghana’s recent debt restructuring has emerged as a central reference point in discussions on reform. The country moved from default and domestic debt restructuring in 2022 to securing an agreement with official creditors in January 2024, a timeline considered relatively fast under the Common Framework.

The process helped unlock progress under Ghana’s IMF-supported programme and facilitated additional financing from multilateral institutions. By comparison, Zambia’s restructuring, which began in 2020, extended over more than three and a half years, reflecting prolonged negotiations and weaker creditor coordination.

The divergence illustrates how outcomes under the Common Framework depend heavily on creditor alignment rather than a standardized process.
In Ghana’s case, bilateral creditors, including China, engaged earlier in the process, while domestic debt restructuring allowed for broader burden sharing. Zambia’s negotiations, by contrast, were marked by fragmentation among creditor groups and difficulty achieving agreement on comparable treatment.

Despite Ghana’s faster progress, both cases exposed similar weaknesses, including delays linked to coordination challenges, uncertainty over private creditor participation, and disputes over the scope of eligible debt.

Domestic Debt and Burden Sharing
A distinguishing feature of Ghana’s restructuring was the inclusion of domestic debt alongside external obligations. Authorities launched a Domestic Debt Exchange Programme in December 2022, before advancing negotiations with external creditors. Ghana’s domestic debt restructuring programme is widely reported as having delivered about GH? 60 billion in savings, which is roughly 30 percent of the domestic debt stock and about 7 percent of GDP. The programme itself covered about GH? 137.3 billion of domestic notes and bonds that were exchanged for new bonds.

This approach helped distribute adjustment costs more evenly across creditor groups and contributed to a quicker overall process. However, it also introduced risks to financial stability, particularly for domestic financial institutions holding government securities.
Zambia’s restructuring, which focused primarily on external debt, relied more heavily on coordination among foreign creditors and took longer to conclude.
The comparison highlights a structural trade-off in sovereign debt restructuring: broader burden sharing may accelerate agreements but can shift risks to domestic financial systems, potentially affecting credit conditions and economic recovery.

Macroeconomic pressures and policy constraints
Ghana entered restructuring under significant fiscal and external pressure, with public debt nearing 90 percent of gross domestic product. Authorities aimed to reduce this to around 55 percent of GDP to restore sustainability.
The government suspended external debt service and pursued treatment under the Common Framework while implementing domestic fiscal adjustments.
Across Africa, similar pressures are evident. The African Consultative Group noted that high debt service burdens and constrained financing conditions continue to limit policy space, particularly in low-income and fragile states.

Policymakers agreed that near-term priorities should include anchoring inflation expectations and protecting vulnerable populations through targeted, time-bound support. Fiscal policy, they said, must remain credible but flexible, with oil exporters rebuilding buffers and oil importers safeguarding critical spending while strengthening domestic revenue mobilization.

Structural weaknesses in the common framework
The Common Framework, introduced in 2020, was designed to provide coordinated and durable debt treatments for countries facing unsustainable debt levels. It builds on earlier initiatives by aiming to address solvency challenges rather than providing temporary relief.
Central to the framework is the principle of comparability of treatment, which requires all creditors to provide relief on similar terms. In practice, implementation has been uneven. Only a limited number of countries have sought treatment, and most cases have experienced delays. Private creditor participation remains a key challenge, complicating negotiations and slowing final agreements. Disputes over debt coverage and the sequencing of negotiations have further contributed to uncertainty.

Dr. Asiama noted that reforms should include clearer timelines, stronger enforcement mechanisms and improved coordination among creditor groups.

IMF toolkit and policy adaptation
Beyond restructuring, African policymakers are calling for broader changes to the IMF’s policy and financing toolkit.

The BoG Governor said the Fund should scale up concessional access, institutionalize the rechanneling of Special Drawing Rights, and make facilities such as the Resilience and Sustainability Trust more flexible and responsive to concurrent liquidity and climate shocks.
The African Consultative Group also highlighted the importance of ongoing reforms to the Low-Income Country Debt Sustainability Framework, noting that enhancements to methodology and debt coverage could improve transparency and help policymakers better assess vulnerabilities.

They urged the IMF to strengthen surveillance, improve analysis of spillovers, and provide more tailored policy advice in an increasingly complex global environment.

Financial stability and growth risks
Even in Ghana’s case, concerns remain about the longer-term implications of restructuring. The domestic debt exchange raised questions about financial sector resilience and the potential for reduced lending capacity.

The restructuring is reported to have delivered about GH? 60 billion in government savings, easing fiscal pressure and reducing immediate domestic debt-service burdens. At the same time, it caused losses across the financial system, including the central bank and bondholders, and contributed to a credit crunch that made borrowing harder and more expensive for businesses and households. It also reduced confidence among investors and added stress to pension liquidity and bank balance sheets.

Plainly, DDEP helped Ghana avoid a worse debt crisis, but it did so by shifting pain into the financial system and real economy. In the short term, that meant slower growth; over time, the hope is that lower debt pressure supports a more stable GDP path
Critics have also pointed to the risk that IMF-linked adjustment programs could constrain public spending, affecting growth and social outcomes. These dynamics reflect a broader challenge: debt restructuring can restore short-term sustainability but does not automatically resolve underlying growth constraints or external vulnerabilities.

Outlook: Reform momentum builds
In view of the recent slower growth projections, persistent debt vulnerabilities, and external shocks; the call for reforms of the global debt architecture is intensifying.
The African Consultative Group’s statement amplifies the need for policies that address immediate shocks while building medium-term resilience, including structural reforms to support diversification, regional integration, and investment in infrastructure and digital systems.

Nonetheless, the IMF reaffirmed its commitment to supporting African countries through policy advice, financing and capacity development.
The experience of Ghana and Zambia suggests that while the Common Framework can deliver outcomes, its effectiveness remains constrained by coordination challenges and limited private creditor participation.

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