The International Monetary Fund’s executive board has approved a $3 billion, three-year extended credit facility for Ghana, three senior Ghanaian officials said on Wednesday, as the West African country tries to overcome its worst economic crisis in a generation.
Two other sources familiar with the process said the IMF agreement marked an important step for Ghana, but cautioned that authorities there faced long negotiations with creditors, pointing to Zambia where the process has been mired in delays.
“The IMF Executive Board approved, on May 17th, an SDR 2.242 billion (about US$3 billion) 36-month Extended Credit Facility (ECF) arrangement for Ghana. This decision enabled an immediate disbursement equivalent to SDR 451.4 million (about US$600 million). The rest is expected to be disbursed in tranches every six months, following program reviews approved by the IMF Executive Board,” statement read in part.
The move comes five days after the formal announcement of an Official Creditors Committee (OCC) instituted by the Paris Club and headed by China and France. The formation of this committee paved the way for the IMF’s blessings.
The loan agreement, which was reached at the staff level in December, has attained Board-level approval in record time.
In comparison to Zambia, experts anticipate that Ghana’s debt restructuring process will likely proceed more swiftly and smoothly. This optimism stems from the fact that China, the largest bilateral creditor of Zambia, holds a smaller proportion of Ghana’s debt. China has faced accusations of causing delays in Zambia’s debt restructuring, allegations that it vehemently denies.
The time elapsed between securing a staff-level agreement on the $3 billion loan and obtaining IMF board approval for Ghana amounts to 156 days. In contrast, Zambia faced a lengthier timeline of 271 days, primarily due to the extended period required to secure bilateral creditor participation in the process.
This, however, comes as official data reveals that approximately US$5.4 billion of debt owed to official creditors has been identified for restructuring.
Furthermore, the nation’s debt to private overseas creditors amounts to US$14.6 billion, which is also earmarked for restructuring, leading some analysts to suggest that debt restructuring talks could remain lengthy.
Nevertheless, analysts expect the markets to respond favorably to the announcement.
As Ghana now moves forward with its IMF-approved loan, the nation seeks to implement comprehensive measures to address its debt burden and stabilize its economy.
The success of its debt restructuring talks will play a vital role in determining Ghana’s path toward financial recovery and sustainable growth.