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

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

Three related events are happening this week, starting with a visit by the Finance Minister, Ken Ofori-Atta, to China. He left Accra this afternoon for Addis Ababa and will travel from there to China to hold debt discussions on debt restructuring with officials there.

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

Third on the list this week is Thursday’s make-or-break vote in Parliament on three key revenue bills which must be passed to confirm Ghana’s seriousness about doing better than staying below the continental average for revenue mobilisation.

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

Of the three top items on the priority list, two are most crucial, and one of these is in Ghana’s own hands: namely, the three revenue bills. The other one is 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 co-ordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As a debtor country such as Ghana undertakes reforms to stabilise and restore her macroeconomic and financial position, Paris Club creditors provide an appropriate debt treatment.

The Paris Club lenders’ meeting in the French capital on Tuesday (21 March 2023) 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 nation Paris Club, which holds the bulk of the country’s bilateral debts. But Ghanaian officials have been having prior engagements with the creditor nations involved, which should help speed up the process.

Ideally, Ghana hopes 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, Denmark, Japan, the Netherlands, UK and US.

Alternatively, failing that, Ghana can strike 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 (26 March).

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 will meet this Thursday (23 March) to vote on the three revenue bills.

MPs in 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.

While China accounts for 34% of Ghana’s total bilateral debts of $5 billion, bilateral debts overall account for less than 10% of Ghana’s total indebtedness.

The China factor
Ghana’s Finance Minister, who left Accra on Sunday afternoon, will first stop over in Addis Ababa, Ethiopia, to attend the meeting of African finance ministers, which will revolve around the continent’s suffocating debts. He will also meet with officials of the UN Economic Commission for Africa, again over concerns about Africa’s growing indebtedness, especially since COVID-19.

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 heels. Other non-member creditors such as 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 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 made significantly smoother since the successful completion of the Domestic Debt Exchange Programme (DDEP). A senior source at the MoF said that, “in principle, we can say we have a framework of a deal with holders of our Eurobond”.

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

Thus, Ghana is still on course to close the IMF deal in relatively quick time. The exact time frame, which could be up to six or seven weeks, will 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 News showed 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 since it became the first African country to apply for an IMF bailout to counter the results of the COVID-19 downturn way back in November 2020.

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

The IMF and Ghana reached a staff-level agreement on the proposed $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 by 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 only now to meet on Ghana has also meant that the IMF deal will have to wait for the work of the Paris Club’s OCC on the common framework to be completed first.