1. Brief background
By the end of the 3rd Quarter of 2021, Ghana’s fiscal vulnerability had been evident to the market resulting in a loss of market access largely consistent with the country’s struggle to manage its public debt since independence. In all of Ghana’s program engagements with the International Monetary Fund (IMF), debt unsustainability has been recurring reflecting a weak fiscal regime of expenditure rigidities and low domestic revenue mobilization.
The latest IMF Supported Program is unique given the number of prior actions the country had to undertake in order to qualify for help from the IMF including taking a comprehensive approach to restructuring the country’s public debt with the domestic debt restructuring being a condition precedent to getting IMF Board approval. Unlike the case of Zambia, which excluded the domestic debt from its debt restructuring to protect the domestic financial system, Ghana applied the most aggressive debt restructuring which was first announced on December 5th, 2022.
Arguably the first of its kind in the history of the country. Government instruments (excluding only treasury bills) held across households (including pensioners), financial institutions, body corporate, and resident and non-resident investors were considered to be in the universe of eligible bonds. The country’s economic fundamentals had deteriorated to the extent that the traditional fiscal consolidation measures embodying expenditure restraint and revenue enhancement measures were considered to be inadequate and therefore restructuring had become fundamental to restoring fiscal sustainability.