Ghana has submitted a plan to restructure its foreign debt to its official lenders, according to sources familiar with the matter.
The plan is not legally binding and is only a starting point for more detailed negotiations that will likely involve multiple proposals. The West African nation is seeking to reduce its external debt burden as it faces its worst economic crisis in a generation.
The official creditor committee, which includes the Paris Club and China, was formed in May 2023 to consider Ghana’s debt restructuring request under the Common Framework process. The process was established by the G20 in 2020 to coordinate debt relief efforts among official creditors.
Ghana aims to save $10.5 billion in interest payments on its external debt over the next three years as part of its $3 billion loan deal with the International Monetary Fund (IMF). Its debt to China and the Paris Club members amounted to $5.4 billion out of the $20 billion external debt due for restructuring, as of December 2022. The total external debt stock was about $30 billion.
Ghana has already completed a domestic debt exchange with 65% of holders of local bonds in February and is also working on restructuring the rest of its domestic debt, including deals with pension funds, labour unions and independent power producers.
Ghana’s economy has been hit hard by high inflation, currency depreciation, and rising borrowing costs. Inflation reached a 21-year high of 40.4% in October 2022, while the cedi lost more than 50% of its value in 2022. Interest payments consumed between 70 and 100% of government revenues, according to Finance Minister Ken Ofori-Atta.
An IMF team will visit Ghana from June 8 to 15 as part of its regular engagement under the $3 billion loan programme, an IMF spokesperson said on Wednesday. The first formal review of the programme will happen in the coming months.