Ghana is courting IMF and World Bank support as it advances debt restructuring and tries to steady public finances

Accra, Ghana — Ghana secured an agreement in principle on January 18, 2024, with official creditors under the G20 Common Framework to restructure its external debt, the World Bank said. The deal aims to restore fiscal stability and unlock about $300 million in budget support from international financial institutions, according to the World Bank.

The deal, which involves 25 creditor countries, aims to reschedule debt payments originally due between 2022 and 2026 to new maturities extending from 2039 to 2043. According to the World Bank, this restructuring is consistent with the Joint World Bank-IMF Debt Sustainability Framework and is intended to reduce fiscal pressures, allowing the government greater space for development spending.

The agreement in principle reached on January 18, 2024, by the Official Creditors’ Committee under the G20 Common Framework marks a critical step in Ghana’s efforts to restructure approximately $2.8 billion in external debt, the World Bank said.

The World Bank highlighted that the restructuring agreement is expected to unlock about $300 million in budget support, backed by the International Development Association (IDA). The institution said its Board of Executive Directors would consider the budget support operation shortly after the announcement. Officials noted that the arrangement would contribute to Ghana’s fiscal recovery and help attract investment by restoring debt sustainability. The International Monetary Fund (IMF) has also been engaged in assessing Ghana’s debt sustainability and supporting a broader economic stabilization program linked to the restructuring.

Ghana’s parliament approved the debt restructuring framework as part of a broader effort to address one of the country’s most severe economic crises in decades. The nation has been grappling with 20-year-high inflation, a depreciated currency, rising inequality, and constrained public finances, according to economic reports. These challenges have limited the government’s ability to invest in critical sectors such as health care, education, and infrastructure, prompting the request for international support.

A December 2019 Joint World Bank-IMF Debt Sustainability Analysis classified Ghana’s risk of external debt distress as “High,” with the overall risk of debt distress also rated as “High.” The report noted breaches in key debt indicators and stated that debt sustainability would depend on continued fiscal discipline and favorable market access. These findings underscored the necessity of the current restructuring to restore macroeconomic stability and sustainable growth, according to the World Bank.

The restructuring is part of a policy framework emphasizing fiscal discipline and macroeconomic stabilization. The World Bank said the January 2024 agreement could help Ghana return to a sustainable growth path and improve recovery prospects. IMF support has been tied to a new assessment of debt sustainability and the implementation of reforms aimed at stabilizing public finances.

Development analysts have noted that debt relief is expected to free up public resources that would otherwise be allocated to debt service. These funds could then be redirected toward social and economic investments, including poverty reduction programs. The World Bank framed the debt treatment as creating conditions conducive to sustainable growth, while emphasizing the importance of balancing creditor repayments with broader economic recovery.

Ghana’s debt restructuring process and associated international support reflect ongoing efforts to address fiscal vulnerabilities and restore investor confidence. The World Bank and IMF continue to monitor the implementation of the agreed terms, with further financial support contingent on Ghana’s adherence to the agreed fiscal and economic reforms.