China, which is Ghana’s largest bilateral creditor, has urged the IMF and World Bank to offer debt relief to the country by participating in its external debt restructuring program.
According to China’s Foreign Affairs Minister, debts owed by Ghana to both the IMF and the World Bank should be restructured, given that the two institutions are also major creditors to the nation.
This move follows the Bretton Woods Institutions’ call for debt restructuring of developing countries, including Ghana, to reset debt levels to sustainable levels and, in some cases, to help secure bailout programs.
Ghana’s total debt owed to external creditors stands at $29.2 billion, with Eurobonds accounting for $13.1 billion, multilateral accounts for about $8.1 billion, Paris Club countries for $1.9 billion, and other creditors accounting for $3.2 billion.
Against this backdrop, Ghana’s Finance Minister, Ken Ofori-Atta, is currently in China to engage with representatives of the Chinese government on debt restructuring. The meetings, which are set to take place from March 23rd to March 24th, 2023, will also involve technical officials from the Ministry of Finance, Ministry of Foreign Affairs, and the Bank of Ghana.
The success of these discussions is pivotal for Ghana as it seeks to restructure $5.7 billion of its external debt, with China holding a third of the figure, amounting to $1.7 billion. China’s involvement in Ghana’s debt restructuring program has been critical, given that the country is the largest bilateral creditor to Ghana.
It is hoped that the meetings will yield positive results, as the restructuring of Ghana’s external debt is essential for the country’s long-term economic stability and development.
The involvement of the IMF and the World Bank in Ghana’s debt restructuring program could provide significant debt relief, which would free up resources for much-needed investments in social and economic development.
However, the two institutions have their own procedures and criteria for debt relief, and it remains to be seen how they will respond to China’s call.
The outcome of the meetings between Ghana’s Finance Minister and representatives of the Chinese government will be closely watched by other developing countries struggling with debt burdens.
If successful, the debt restructuring program could provide a model for other countries to follow and avert a potential debt crisis in the region. It is also a reminder of the importance of global cooperation and coordination to address the growing debt burden of developing countries, which has been exacerbated by the COVID-19 pandemic.