Stuck in an economic crisis, Ghana is seeking to restructure its domestic debt to meet its urgent needs.
Finance Minister Kenneth Ofori-Atta on Monday proposed a plan that would see the West African country eventually swap around $9.7 billion in current debt for four new bonds maturing between 2027 and 2037.
Additionally, Ghana is seeking a $3 billion loan to deal with record inflation of 37% and the collapse of its currency – the cedi. In his address on Sunday, the finance minister said banks and government-recognized financial institutions hold much of local government debt, but regulators and the central bank would help mitigate the impact on these latter.
“Today’s announcement is a major policy step the government is taking in the short term to restore macroeconomic stability, ensure debt sustainability and get the economy back on track to create and protect jobs, to provide and improve incomes, foster strong and inclusive export-led growth and restore hope to the people of Ghana,” he said.
Ghana is one of the main producers of cocoa and gold and has oil and gas reserves, but the repayment of its debt absorbs its income, more than 70% of its tax revenue is dedicated to it, which exerts a pressure on public spending.
“This is a critical requirement to enable the Ghanaian economy to recover as quickly as possible from this crisis. It is also a critical requirement for securing IMF support. The alternative would be a much worse economic crisis, with a prolonged closure of international markets, especially of imported goods and services, and additional domestic economic instability, both for the real economy and for the financial sector.
This external debt restructuring plan will be presented in the days to come, assured the Minister of Finance. According to Kenneth Ofori-Atta, the economy should stabilize next year and inflation will return to single digits thanks to the debt restructuring plan and the IMF loan.