Debt restructuring: Ghana bilateral creditors to form committee

Ghana is currently at a critical juncture as it navigates through a challenging macroeconomic landscape. With inflation soaring to record-high levels and the need to close a $3 billion IMF deal looming, the West African nation is facing significant hurdles on its path to economic recovery. Angela Onotu, an SSA Economist at Vetiva, shed light on Ghana's macroeconomic story in a recent interview with CNBC Africa. Despite some recent moderation in inflation, which dropped from a staggering 54.1% in December to 52.8% in February, Ghana still has a long way to go to achieve its target of 8% inflation. The global decline in oil prices has played a role in easing inflationary pressures, given Ghana's reliance on crude oil imports. The stability of the Ghanaian cedi, supported by initiatives such as the Gold for Oil program and the suspension of payments on external debts, has helped mitigate the demand for foreign exchange and stabilize the currency. Looking ahead, the Monetary Policy Committee (MPC) in Ghana recently raised interest rates, with expectations of further rate hikes in the future. The MPC is likely to maintain a hawkish stance to combat high inflation levels and bolster investor confidence. While the easing of inflation is a positive sign, Ghana's central bank remains vigilant in its efforts to rein in inflation and maintain macroeconomic stability. Another significant development in Ghana is the removal of fuel subsidies and the establishment of a special fund for refineries, signaling the government's commitment to structural reforms in preparation for the IMF deal. These measures align with the IMF's requirement for fiscal consolidation and debt reduction, as Ghana aims to bring its debt-to-GDP ratio down from 105% to 50%. The removal of fuel subsidies, though a challenging decision, is seen as a necessary step to alleviate fiscal strains and foster stability in the energy sector, ultimately supporting economic growth. The impending IMF deal and the implementation of structural adjustments are expected to have a positive impact on Ghana's currency, the cedi. By reducing pressures on foreign exchange reserves and demonstrating a commitment to economic reforms, Ghana anticipates a boost to its currency post the IMF agreement. The combination of fiscal discipline, removal of subsidies, and external support from bilateral creditors like the Paris Club and China is crucial for Ghana to pave the way for sustainable economic growth and stability in the long run.