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Financial assurance from external creditors.
Ghana is set to receive $3 billion from the IMF. This is for its Balance of Payment (BoP) support between 2023 and 2026. This bailout package is to be distributed in installments.
The first installment of $600 million has already been received. The country aims to access the second tranche by the end of 2023, contingent upon meeting all requirements.
Before the first disbursement, Ghana had to secure financial assurance from its external creditors. Consequently, this condition must be met before the IMF Executive Board approves the payment.
Under the three-year ECF program, the Ghanaian government plans to restructure around $10.5 billion of its external debt. This stood at nearly $30 billion in June 2023.
There are differing opinions on the conditions for receiving the second tranche of $600 million. This would bring the total disbursement to $1.2 billion after the Fund’s first review.
Different opinions
Ghana’s Info Minister, Kojo Oppong Nkrumah, hinted in JoyNews that external creditor deals might not be needed for the second installment.
“I don’t think that if we look at the fine print, that agreement is a condition precedent for accessing the next tranche” the minister expressed.
In response, Professor of Finance at the University of Ghana Business School, Godfred Bokpin, noted no IMF program mentioning external creditor agreements as a prerequisite for the second disbursement tranche.
“I haven’t seen it anywhere, maybe I’ve not read the document well enough. “I haven’t found any statement saying that we need to agree with external creditors before receiving the second installment,” he stated.
Stephane Roudet’s statement
In the past, IMF’s Mission Chief for Ghana, Stephane Roudet, informed JoyNews in an interview that the government must obtain financial assurance from external bilateral creditors. Only after this will its board can approve the next tranche of funds for the country.
Just a few days after debates about securing the second installment, IMF’s Managing Director, Kristalina Georgieva, commended Ghana for achieving a staff-level agreement on the first program review.
Prof. Bokpin said Mr. Roudet’s comment came as a surprise to him.
“When I saw that statement from the Mission Chief…I became a bit quiet because from all my work and insight…I never come across something like that.”
The professor mentioned that he had spoken with certain members of Ghana’s official creditor committee. They informed him that reaching an agreement with them was not a requirement for the second tranche disbursement.
I spoke to some creditor committee representatives, and I’ve questioned whether an agreement is a strict requirement. It seems not, unless there are undisclosed factors. I believe meeting the IMF program targets should enable us to receive the next tranche, as it appears relatively straightforward.
Considering varying views, it’s vital to review the IMF’s requirements for Ghana to obtain the second disbursement.
What does the fine print say?
Page 72 of Ghana’s IMF program states that completing the first review allows Ghana to access the second $600 million. This means that without a successful first review, it’s very unlikely for Ghana to get the extra $600 million.
Who can pass the first review?
According to the IMF’s press release on October 6, 2023 (PRESS RELEASE NO. 23/339), Ghana will receive around $600 million in financing when the IMF Management approves the review. This will formally completed by the IMF Executive Board.”
What will make IMF Executive Board approve the first review?
According to the same IMF press release, for Ghana to “ensure timely completion of the review, the country needs official creditors to quickly reach agreement. This agreement must be on a debt treatment. This must be in line with the financing assurances they provided in May 2023.”
IMF Managing Director
In just under three days, after varying views on securing the second tranche, the IMF’s Managing Director, Kristalina Georgieva, commended Ghana for achieving a staff-level agreement in the first program review. She however stressed that the Fund is “counting on the bilateral creditors reaching an agreement on debt relief soon. This will move the review forward.”
The IMF clearly states that Ghana must get financial assurance from its external creditors to receive the next $600 million. This is expected to double the total program disbursement to $1.2 billion. Also, Ghana’s debt agreement with foreign creditors could bring in about $2.5 billion in 2023, which should help with its Balance of Payment deficit.
Source: myjoyonline
