As part of a debt restructuring agreement with the International Monetary Fund, IMF, Ghana halted payments on a portion of its foreign debt on Monday.
With inflation at more than 50% and a severe decline in the value of the cedi due to the negative impacts of the worldwide pandemic and the Ukraine crisis, the West African country is experiencing an economic crisis.
“That is why we are announcing today a suspension of all debt service payments under certain categories of our external debt, pending an orderly restructuring of the affected obligations,” the finance ministry said in a statement.
“This suspension will include the payments on: our Eurobonds; our commercial term loans; and on most of our bilateral debt,” it said.
However, the government stated that payments on international debt, new debt (whether multilateral or otherwise), acquired after December 19, 2022, or obligations owed on a few short-term trade facilities would not be suspended.
“We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded,” it said.
Ghana, formerly seen as a favorite among investors, has recently battled with its debt load. In order to pay off its debt, the government uses more than half of its revenue. Just this year, the collapse in the cedi raised the value of debt by $6 billion.
The suspension of payments on the nation’s foreign debt was described by the administration as a temporary emergency measure pending future arrangements with the nation’s creditors.
Additionally, it pledged to work with all of its foreign creditors to make Ghana’s debt manageable. Ghana and the IMF reached a $3 billion financing agreement last week to help the country with its economic woes.
Although the fund’s board has not yet given final approval to the three-year loan, the program’s objectives are to lower inflation, increase market confidence in the nation, and make the economy more resilient to outside shocks.
Ghana, a major producer of cocoa and gold with oil and gas potential, has a high debt load and, like the rest of sub-Saharan Africa, has been severely impacted by the Covid outbreak and the Ukraine war.
As experts forewarned of a default on debt payments, the crisis compelled President Nana Akufo-Addo’s to change its stance earlier this year and request assistance from the IMF.
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