Ghana needs debt cancellation, not private lender bailout

Ghanaian civil society organisations have called for Ghana’s debt to be cancelled, rather than an IMF loan bailing out private lenders.[1] In a statement released today they say any IMF loan must include debt cancellation to make Ghana’s debt sustainable.

Last week Ghana entered negotiations with the IMF on a new loan. Ghana is in a debt crisis with public spending falling and high inflation caused by the global food and fuel crisis. Meanwhile the rising value of the dollar is increasing debt repayments. Unless a debt restructuring takes place, any IMF loan will be used to pay high interest rates to private lenders.

Bernard Anaba, Public Policy Specialist at the Integrated Social Development Centre (ISODEC) in Ghana said:

“Past IMF loans have helped pay high interest debt to private lenders, while not ending Ghana’s debt crisis. This time it is the people of Ghana who must be bailed out, not the profits of rich lenders. That means cancelling debt alongside protecting and expanding vital public services and social safety nets.”

Heidi Chow, Executive Director of Debt Justice said:

“Speculators lent to Ghana at high interest rates and bought debts at low prices. They took this gamble to reap lucrative returns but they lost their bet and they now need to take responsibility by cancelling Ghana’s debt.”

Independence Arch in Accra, capital of Ghana (Joe Ronzio / Flickr)

The Ghanaian signatories to the statement are the Integrated Social Development Centre (ISODEC), Caritas Ghana, ActionAid Ghana, Faith in Ghana Alliance, Tax Justice Coalition Ghana and the AbibiNsroma Foundation. International supporters include Caritas Africa, Debt Justice, the Asian Peoples’ Movement on Debt and Development, Eurodad and the Global Call to Action Against Poverty.

Ghana’s government external debt service has increased from around 5% of government revenue from 2007-2012 to over 40% in 2021[2], well over the IMF threshold for debt sustainability of 18% of government revenue. Ghana is due to pay $1 billion in external interest payments in 2022, 90% of which are to private lenders.[3]

Ghana’s high interest Eurobonds have been bought and sold on financial markets at well below face value since autumn 2021, reaching less than 50 cents on the dollar by June 2022.[4] This means if paid in full, bondholders will make super profits out of Ghana, both from the high interest, and from buying the debt cheaply. Ghana’s bonds are all governed by English law, which means the UK could pass legislation to enforce any debt restructuring on private lenders.

For the IMF to lend to a country with an unsustainable debt that country must seek a debt restructuring to make it sustainable. If creditors refuse to participate in such a debt restructuring, the IMF can still lend, so long as the country defaults on recalcitrant creditors.[5]


[1] The full statement is available here https://debtjustice.org.uk/wp-content/uploads/2022/08/Statement-IMF-loan_07.22.pdf 

[2] Calculated from World Bank International Debt Statistics database and IMF and World Bank 2021 Debt Sustainability Analysis. Full statistics are available at: https://data.debtjustice.org.uk/

[3] Calculated from World Bank International Debt Statistics database. Of Ghana’s external debt principal and interest payments between 2022 and 2028, 56% are to Western private lenders, 24% to multilateral institutions, 11% to Chinese public and private lenders and 8% to other governments.

[4] For example see: https://markets.businessinsider.com/bonds/ghana-_republic_of-bond-2029-xs1821416234

[5] See https://jubileedebt.org.uk/wp-content/uploads/2019/10/IMF-policy-on-debt-restructurings_English_10.19-1.pdf

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