Staff-Level Agreement not enough to release third tranche – IMF to Ghana

Ghana has reached a Staff-Level Agreement with the International Monetary Fund (IMF) for the second review of the Extended Credit Facility, but the Executive Board insists that the Ghanaian authorities must obtain the needed financial assurances from external creditors before disbursing the planned $360 million.

During April 2-12, 2024, an IMF staff delegation led by Stéphane Roudet, the Mission Chief for Ghana, convened in Accra to review the country’s reform progress and the government’s policy focus within the framework of the second evaluation of Ghana’s three-year programme under the Extended Credit Facility.

Ghana has begun another debt restructuring dance toward securing a $360 million package after reaching an IMF Staff-Level Agreement.

Beyond this agreement, there’s a big hurdle for the West African nation to cross as it works towards obtaining key financing assurances from its external bilateral creditors.

“This staff-level agreement is subject to IMF Management approval and Executive Board consideration once the necessary financing assurances have been received.

“An agreement between the Ghanaian authorities and their official creditors on an MoU for a debt treatment in line with program parameters would provide the needed financing assurances”

With this condition in full swing, it means Ghana has not yet completed the second review to trigger the release of the $360 million.

The IMF Mission Chief for Ghana pointed out that the “staff-level agreement is subject to IMF Management approval and Executive Board consideration once the necessary financing assurances have been received.

“An agreement between the Ghanaian authorities and their official creditors on an MoU for a debt treatment in line with program parameters would provide the needed financing assurances.”

The Fund has stressed that to ensure the timely completion of the review, Ghana and its official bilateral creditors need to reach an agreement on a Memorandum of Understanding for a debt treatment, consistent with the agreement in principle reached in January 2024.

In fact, in January 2024, the Finance Ministry stated that the terms of the approved debt relief plan with official bilateral creditors were expected to be finalised in a Memorandum of Understanding (MoU).

This MoU was anticipated to be executed through individual bilateral agreements with each member of the Official Creditor Committee.

“The terms of the agreed debt treatment are expected to be formalised in a Memorandum of Understanding between Ghana and Official Creditors, which will then be implemented through bilateral agreements with each member of the Official Creditor Committee.

“The Government of Ghana looks forward to further engaging with the Official Creditors to ensure prompt implementation of the agreed terms” the ministry indicated.

Dealing with each creditor can be a difficult task as the issue of comparability of treatment is likely to pop up at every stage of the negotiations which could delay the IMF Executives Board’s passing of Ghana’s second review programme.

But until Ghana obtains the needed financing assurances in a formalised MoU, it will be difficult for the $360 million to hit the account of the Bank of Ghana.

Nevertheless, Ghanaian authorities hold a strong belief that the necessary financial assurances will be secured, as they anticipate fruitful discussions on debt restructuring with external creditors, particularly those in the bilateral sector.