US$3bn IMF Deal: Critical week ahead as Finance Minister leaves for China, Parliament votes on revenue bills, Paris Club meets on Ghana

This week, beginning Sunday 19 March, is crucial to Ghana’s quest to securing a board-level approval of the US$3 billion United States International Monetary Fund (IMF) programme to support Ghana’s post-COVID-19 economic recovery efforts.

Three related events are happening this week, starting with Finance Minister, Ken Ofori-Atta’s visit to China. He left Accra this afternoon to Addis Ababa, continuing from there to China to hold debt restructuring discussions with officials there.

Second on this week’s priority list is a Paris Club meeting on Ghana’s debt scheduled for Tuesday. That meeting is most critical in determining how quickly Ghana can secure the IMF deal.

Third on the list this week is Thursday’s make-or-break voting in Parliament on three key revenue bills which must be passed to indicate Ghana’s seriousness and doing better than being below the continental average on revenue mobilisation.

They are the Income Tax (Amendment) Bill, the Excise Duty & Excise Tax Stamp (Amendment) Bills and the Growth and Sustainability Levy Bill.

On the three priority lists, two are most crucial, with one of them in Ghana’s own hands: namely, the three revenue bills. The other being the Paris Club meetings.

Critical “Paris Club” deal

The Paris Club (Club de Paris) is a group of officials from major creditor countries whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As a debtor country like Ghana undertakes reforms to stabilise and restore her macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment.

The Paris Club lenders meeting in the French capital city of Paris on Tuesday , 21 March on Ghana’s debt restructuring is expected to set up an “Official Creditors Committee” on Ghana. The work of the OCC will, typically, take about three weeks. Tuesday’s meeting will set the ball rolling and give Ghana the greatest indication yet as to how quickly the anticipated IMF deal can be closed.

Ghanaians now can only wait and see the timetable to be set by the 22-member nations Paris Club, which holds majority of the country’s bilateral debts. But, Ghanaian officials have been having prior engagements with the creditor nations involved, why should all help speed up the process.

Ideally, Ghana hopes Ken Ofori-Atta’s trip can help get China to join the Paris Club meetings, which will agree on a common framework for all its member creditors, including Belgium, UK, USA, Japan, Denmark and the Netherlands.

Alternatively, failing which, Ghana can do a separate bilateral deal with China, but on similar principles of restructuring. That is also at the heart of the Ghanaian delegation’s business in China this week. The team should return next Sunday.

Parliamentary action

The nation’s fate after the successful implementation of the Domestic Debt Exchange Programme is also now heavily dependent on the 275 members of Parliament who meet this Thursday 23 March to vote on the three revenue bills.

Members of Parliament from the National Democratic Congress caucus have been directed by the NDC secretariat to vote against the three bills.

The Minority Leader, Cassiel Ato Forson last week suggested that the seeming delay in agreeing on a debt restructuring deal with China is what could kill the IMF deal. He made no mention of the three bills.
Whiles China accounts for 34% of Ghana’s total bilateral debts of US$5bn, bilateral debts overall account for less than 10% of Ghana’s total indebtedness.

The China factor

Ghana’s Finance Minister, who left Accra Sunday afternoon will first stop over in Addis Ababa, Ethiopia, to attend the African Finance Ministers’ meeting, which will revolve around the continent’s suffocating debts. He will meet UNECA as well, again on concerns over Africa’s growing indebtedness, especially since Covid-19.

Mr Ofori-Atta’s reciprocal trip to China is to hold discussions with officials of the finance ministry of China, the central bank of China, and China’s Eximbank, principally over how to cross the debt restructuring line with China, ideally as part of the common framework with the Paris Club, which also includes Russia.

The Chinese who are not members of the Paris Club have so far dragged their feet. Other non-member creditors like Saudi Arabia and India on the other hand, are expected to join the Paris Club meetings.

Confident of a deal

An Asaase News source at the Ministry of Finance, who is familiar with the ongoing IMF negotiations, has expressed confidence in securing IMF Executive Board approval once the work of the Paris Club is complete and an agreement is reached with China.

Meanwhile, negotiations with Eurobond holders are said to have been significantly smoothened since the successful completion of the DDEP and that “in principle, we can say we have a framework of a deal with holders of our Eurobond,” a senior source at MoF said.

Another good news is that Ghanaian officials have met with all executive directors of the IMF, including Germany, the United Kingdom, France, Japan, and the USA.

Thus, Ghana is still on course to close the IMF deal in a relatively quick time. The exact time frame, which could be up to six or seven weeks, would be made clearer this week, particularly after Tuesday’s Paris Club meeting and the Parliamentary votes on the revenue bills on Thursday.

As an analysis by Citi indicated last week, Ghana is way ahead in sorting out her debt restructuring programmes. Zambia in comparison has not been able to complete its debt restructuring after being the first African country to apply for an IMF bailout as a result of Covid-19 way back in November 2020.

Ghana will most likely be looking after the Spring Meetings of the IMF and World Bank in Washington DC, which will take place from 10 to 16 April 2023, for the IMF Executive Board.

The IMF and Ghana reached a staff-level agreement on the US$3 billion loan deal in December 2022. Ghana was expected to conclude its domestic debt restructuring by end of January but that was also delayed due to an understandable struggle with bondholders and their representatives on the nature, structure and scope of the domestic debt exchange exercise.

The decision by the Paris Club to only now meet on Ghana has also meant that the IMF deal will have to wait for the work of the Paris Club’s OCC to be completed on the common framework first.

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