Exclusive – IMF and Ghana expected to reach staff level agreement by Tuesday

Exclusive – IMF and Ghana expected to reach staff level agreement by Tuesday

The IMF did not respond to a request for comment. A spokesman for Ghana’s finance ministry said they could not comment beyond the fact that negotiations were ongoing.

Two sources said the IMF program was to be an extended credit facility, which provides financial assistance to countries with protracted balance of payments problems.

One of these sources and a third source said that the main obstacles to the negotiations had been overcome this week, which had accelerated the process.

Ghana turned to the IMF for help in July, and an IMF team is currently in the country until Tuesday.

Finance Minister Kenneth Ofori-Atta has said he hopes for an aid package of up to $3 billion, possibly over a three-year period, as the West African country faces its worst economic crisis in a generation.

“I expect the staff-level agreement to clarify missing details on debt restructuring, both local and external, as government communication on this subject could have been clearer and more consistent over the past few years. weeks,” said Gergely Urmossy, emerging markets strategist at Societe Generale.

“After a few quarters, if we see the primary budget heading into surplus, especially in a sustainable way, investors’ appetite for Ghanaian assets will increase, and multilateral creditors will be more inclined to offer new lines of funding.”

The cocoa, gold and oil producing West African nation said it needed the deal by the end of the year.

The government began restructuring its debt this week by presenting a plan to swap $10.5 billion of local bonds for new bonds.

If the domestic debt restructuring is “carried out in a consistent manner, with the support of the IMF and the local banking system, the country will be in a much better position to meet short-term external liquidity challenges”, said Carmen Altenkirch, Emerging Markets Sovereign Analyst at Aviva Investors.

The government has not yet announced any plans for a restructuring of the external debt. Creditors are preparing, however, with two sources telling Reuters that a steering committee of dollar debt holders will be announced next week.

A source familiar with the matter said the terms of a foreign debt restructuring were the final hurdle and an agreement should be reached on Friday.

“After December 2020, the Ghanaian government did not go to the IMF and cut fiscal spending,” said Charlie Robertson, global chief economist at Renaissance Capital. “Then higher global borrowing costs in 2022 were the catalyst for its default on domestic debt.”

Ghana’s international bonds remained broadly unchanged on Friday, with most issues trading at much degraded levels of 30-35 cents to the dollar, according to Refinitiv data.