Negotiations between Ghana and the International Monetary Fund (IMF) for the second tranche of a $3 billion credit facility have hit a deadlock, according to Dr. Cassiel Ato Forson, the leader of the Minority caucus in Ghana’s Parliament.
The deadlock reportedly stems from a disagreement between the government and the International Creditors’ Committee (ICC) over the cut-off point for external debt in the debt restructuring process, a crucial factor for securing the next tranche of $600 million from the IMF.
Dr. Forson revealed the impasse during his concluding remarks on the 2024 budget debate in Parliament on Wednesday, November 29, 2023. The disagreement, involving the ICC comprising China and the Paris Club 50, has raised questions about the progress and consensus in the negotiations for the financial assistance package.
He stated, “There is a major disagreement on the cut-off point, regarding the external debt that must be excluded from the restructuring. Ghana is between a rock and a hard place.”
According to Dr. Forson, the decision for Ghana to accept or reject the proposed cut-off point by the ICC will have significant implications for the country’s external debt restructuring. If Ghana agrees to the proposed cut-off point, more debt would be excluded from the restructuring, necessitating its immediate inclusion in the budget for servicing.
“The moment we begin the servicing of our external debt, everything in this budget will change,” he warned.
Ghana had secured a $3 billion bailout package from the IMF to address economic challenges, including high debt, inflation, and a depreciating currency.
The initial installment of $600 million had already been received, but the deadlock in negotiations for the second tranche now raises concerns about the country’s economic stability.
The IMF had previously announced in October 2023 that it awaited the results of Ghana’s discussions with bilateral creditors before disbursing the next installment of the bailout package.
Ghana’s economic future is already uncertain due to the current impasse, which makes matters worse. Ghana needs to make decisions that will determine its debt restructuring and fiscal policies.