Can Ghana secure debt deal with bilateral creditors in May?

Ghana's Finance Minister Amin Adam recently revealed that a draft Memorandum of Understanding (MoU) with the country's bilateral creditors for debt restructuring is expected to be finalized next month. The MoU aims to restructure $5.4 billion in loans with official creditors such as China and France. This development holds significant implications for Ghana's economy and financial stability. To shed light on this matter, Karen Kwarteng, Head of Global Market Sales at Standard Bank, discussed the progress and challenges of Ghana's debt restructuring journey. Kwarteng expressed optimism about the deal's potential to materialize in May, citing positive signals from the International Monetary Fund (IMF) authorities. She highlighted the existence of a draft MoU currently under review, indicating a proactive approach by the Ghanaian government to resolve the debt restructuring issue expediently. Drawing parallels with Zambia's debt restructuring experience, Kwarteng emphasized the importance of swift action in navigating the complex negotiations with bilateral creditors. One of the key motivations driving Ghana's commitment to the debt restructuring process is to avoid a repeat of the country's reliance on the IMF for financial support in 2022. By adhering to the IMF program's parameters, Ghana aims to enhance macroeconomic stability and debt sustainability. Kwarteng underscored the positive economic indicators already observed, including reduced depreciation, higher-than-expected GDP growth, and a projected primary surplus, reflecting the benefits of program compliance. Debt allocation strategies emerged as a pivotal consideration for Ghana, particularly concerning the utilization of incoming tranches to address essential sectors like energy. Kwarteng pointed out the critical role of energy stability in the region and suggested potential allocations to stabilize the Ghanaian currency and combat inflation. Effectively managing the forthcoming 360 million tranche would require judicious resource allocation and strategic economic prioritization. Assessing the progress of fiscal consolidation efforts, Kwarteng commended the government's implementation of structural reforms to address revenue shortfalls and enhance financial management. Notably, the integration of government subvented agencies into the Ghana Integrated Financial Management System demonstrates a commitment to fiscal discipline and budget adherence, essential for sustained economic progress and debt reduction. While reflecting on past challenges related to debt sustainability concerns raised by the IMF, Kwarteng emphasized the necessity of aligning future debt restructuring plans with established sustainability frameworks. She highlighted the recent setback in a bondholder committee engagement due to sustainability parameter discrepancies and emphasized the repercussions of straying from debt sustainability guidelines. Maintaining alignment with debt sustainability parameters is crucial to securing IMF support and safeguarding Ghana's economic stability. Looking ahead, the impending finalization of the MoU in May represents a critical juncture for Ghana's debt restructuring journey. The government's unwavering commitment to economic reform and adherence to program guidelines will be essential in navigating the complexities of debt negotiations and securing favorable terms with bilateral creditors. By prioritizing fiscal discipline, strategic resource allocation, and sustainable debt management practices, Ghana aims to fortify its financial resilience and sustain economic growth in the long term.