The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva has disclosed that the Fund is engaging some international creditors for a possible cancelation of Ghana’s debts.
According to her, the move is targeted at debt cancellation for countries with distress debt levels.
She stated that the countries include Chad, Ethiopia, Zambia, Ghana, Lebanon, and Sri Lanka.
“It is very important for their people that we find the resolution to the debt problem, but the risk of contagion is not as high,” she said on American news channel CBS.
Ms. Georgieva explained that current global condition makes it difficult for debt distressed countries to honour their debt obligation due to international liquidity squeeze.
“If the debt list continues to grow, let us remember that 25% of emerging markets are tragically stressed territory” she warned adding that global economic giants are themselves struggling due to COVID-19 and the Russia invasion of Ukraine.
Providing some details, she stated that the IMF is engaging both traditional and non-traditional creditors to find some space for poor countries in debt distress positions to bring some relief.
“In the IMF, we are working very hard to press for that resolution for these countries. We have engaged the traditional creditors, and the non-traditional creditors, like China, India, and Saudi Arabia. We have to act now”, she stressed.
She pointed out that 2023 is going to be a tough year for China, a major non-traditional creditor.
This, she said could further affect developing countries with high debt level since China will not be able to provide cheaper funds.
Ghana starts debt restructuring
The Internal Monetary Fund (IMF) in November, 2022 confirmed that government of Ghana has declared its intention to conduct a debt operation ( also called debt restructuring) in 2023.
According to an update on the fund’s website, “authorities [Ghana] have assessed their public debt as being unsustainable over the medium term. Together with efforts to bring the government deficit down, they have announced their intention to conduct a debt operation to ensure debt sustainability.”
The Bretton Woods Institution has welcomed government’s decision to tread the path of debt operation.
“We welcome the authorities’ intentions to implement policies that will ensure the sustainability of public finances” the Fund stressed.
The IMF, however, indicated that the “nature of engagements and debt operations between Ghana and its creditors are sovereign decisions.”