IMF Says Ghana at Risk of Debt Distress as Bond Planned

June 15, 2017

 The International Monetary Fund said Ghana remains at a high risk of debt distress as the West African nation plans to clear arrears owed by energy utilities through the sale of a 10 billion cedi ($2.3 billion) local-currency bond.



Ghana and the Washington-based lender are in talks over the terms of a three-year debt-support program that is scheduled to conclude in April 2018 as the world’s second-biggest cocoa producer’s debt rose to 73 percent of gross domestic product at the end of last year. The government said last month that it may issue a bond through a special-purpose vehicle to clear the debts that the state-owned electricity company and petroleum service providers owe to banks and other credit providers.


“The part of the bond used to finance the debt and arrears accumulated by the state-owned enterprises themselves would increase the stock of government debt,” the IMF said Wednesday in an emailed response to questions. “Ghana remains at high risk of debt distress. Continued fiscal consolidation would be required to bring public sector debt on a clearly declining trajectory.”


Finance Minister Ken Ofori-Atta didn’t answer calls seeking comment. Mustapha Hamid, a government spokesman, didn’t immediately answer calls or respond to a request for comment by text message.


Bank of Ghana Governor Ernest Addison, who was appointed in April, said last month that the bond sale wouldn’t add to the debt stock if the government issues it through a special purpose vehicle and uses energy sector levies to service it.

“If that is done, then it might not necessarily be part of the government’s debt,” Addison told reporters on May 22. “It depends on how that is handled.”


Discussions between the parties on how the bailout program’s objective of lower public debt can be achieved are continuing, and include the possibility of extending the debt program, the IMF said in the email.

“Any extension would have to be requested by the Ghanaian authorities, and we understand they are considering the matter,” the lender said.


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