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“$3bn IMF bailout for Ghana to be facilitated by approval from bilateral creditors”

Ghana is seeking to restructure its $58 billion debt, with bilateral creditors meeting on April 11, 2023, to discuss providing enough relief to unlock a $3 billion IMF bailout. The country owes $5.5 billion to foreign governments and their state banks, with hopes that bilateral creditors will consent to enough debt relief to enable the country to tap into the IMF loan package agreed upon last year. Commitments from bilateral creditors are often the first step in unlocking an IMF-backed restructuring program.

Ghana ceased repaying most of its debts in December 2022 and reached a preliminary deal with the IMF on a rescue package in the same month. However, the IMF’s support is dependent on Ghana meeting certain conditions, including measures to raise revenues through a rise in the rate of value-added tax, tariff increases on public utilities, and an end to Central Bank finance for the government.

The pandemic, Russia’s war on Ukraine, and last year’s surge in global inflation and the value of the US dollar against other currencies have pushed many countries into economic crisis and to the brink of default. The IMF and World Bank have warned that a third of developing countries, including 60% of low-income countries, have debts that are unsustainable or in danger of becoming so.

A breakthrough in Ghana’s debt talks could raise hopes of faster workouts in the restructuring of other countries’ debts in the future. Once bilateral lenders have promised enough relief to make a country’s debt sustainable, it is up to the borrower to seek similar terms from other lenders, including bondholders and commercial banks

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