After Filing for Bankruptcy, an African Country Secures Debt Relief from IMF as Nigeria Gets Rating

• After filing for bankruptcy in 2023, Ghana obtained the much-needed debt relief from the International Monetary Fund
• The country’s Finance Minister, Ken-Ofori Atta, revealed that the deal with creditors was responsible for the debt relief
• Among three African countries, Ghana has failed to meet debt repayment obligations.

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The Ghanaian Finance Minister, Ken-Ofori Atta, said the deal with its bilateral creditors, including Paris and China, was critical to unlocking new International Monetary Fund (IMF) financing, which will let it access another $600 million under its $3 billion bailout programme.

Reports say the deal could unlock another $300 million in funding from the World Bank’s development policy financing and an extra $250 million in support for the Ghana Financial Stability Fund.

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Ghana expected to lower debt-to-GDP as a condition for debt restructuring

As a condition for the programme, the Ghanaian government is expected to reduce its public debt-to-GDP ratio by 55% in the next four years.

Ghana’s debt-to-GDP was forecasted to reach 109% before the beginning of the programme.

According to IMF Managing Director, Kristalina Georgieva, the agreement paves the way for the IMF Executive Board’s consideration of the review of the Ghana programme.

The complete debt treatment agreement with official creditors was achieved under the G20 Common Framework.

Ghana fails to repay debt, files for bankruptcy

Countries like Chad, Ethiopia, and Zambia have similarly submitted debt relief requests under the scheme, which has slowed talks due to coordination issues and disagreement between different creditors.

Ghana submitted proposals for debt relief to the official creditor committee in June 2023 after being excluded from international capital markets and seeing a rise in inflation, leading to its default.

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The country filed for bankruptcy in September 2023 after it failed to pay billions of dollars owed to international creditors.

Ghana still needs to meet debt repayment obligations among the three African countries.

Economist and financial analyst, Benjamin Owoyemi said that Ghana's agreement with the IMF is epic considering that the lender hardly yields to wasteful countries.

He said the IMF may not be disposed to grant similar favour to Nigeria considering that Nigeria's debt-to-GDP is considered one of the lowest on the continent.

"Presently, Ghana is one of the few African countries battling high inflation which has largely driven investors away from the country. I think the country's deal with IMF is as historic as it is troubling, It means that the country was in a precarious situation leading to the debt relief, and historic because it set some precedents of some sort for poor countries in Africa burdened with huge debts."

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"Nigeria may not get similar favors from the IMF because it has kept a clean sheet with the IMF and other creditor nations and institutions," he said.

Nigeria ranks among the 10 least indebted African countries by the IMF

Legit.ng reported that ex-President Olusegun Obasanjo says that African countries face challenges in obtaining debt relief due to mismanagement of resources.

The Nigerian elder statesman stressed the need for careful leadership, warning against debt trap, and encouraging qualities such as setting examples and decision-making for effective leadership.

BusinessDay reports that the debt-to-GDP is a critical metric that compares a country's total debt to its economic output, with lower ratios showing financial stability and higher ratios indicating potential challenges in fulfilling debt obligations, influencing global investors and interest rates on government bonds.

Source: Legit.ng