Ernest Addison, the Governor of the Bank of Ghana (BoG), has urged for a swift debt restructuring for vulnerable Group of Twenty (G20) members, including countries such as Ghana, Ethiopia, and Malawi.
This plea follows recent agreements between Zambia and Chad and their creditors, aiming to protect these nations from domestic financial market instability.
Dr. Addison addressed this issue during an African Caucus Meeting on “Making public debt useful for sustainable growth in Africa” at the ongoing International Monetary Fund (IMF)/World Bank Group (WBG) Annual Meetings in Marrakech.
While welcoming the progress made in Zambia and Chad, he stressed the importance of revitalizing the G20 Common Framework (CF) to ensure timely, orderly, equitable, inclusive, and transparent debt restructuring for distressed members in the region, including Ghana, Ethiopia, and Malawi.
Dr. Addison also called for a well-designed debt resolution mechanism, particularly for vulnerable members with significant domestic creditors, like Ghana, to prevent domestic financial market instability.
The Governor highlighted the significance of enhanced engagement between debtors and creditors through an improved Global Sovereign Debt Roundtable (GSDR) and strengthened technical support to facilitate quicker, proactive, and systematic restructuring.
Dr. Addison also emphasized the need for a debt standstill during negotiations to provide immediate relief to debtors, as well as multilateral debt cancellation for the most vulnerable members facing acute debt challenges.
He pointed out that the IMF's increased cooperation with Multilateral Development Banks/Regional Development Banks was crucial in providing timely financial assistance to G20 members dealing with significant debt and growth challenges.
The Governor also called for a new Special Drawing Rights (SDR) allocation through MDBs/RDBs to achieve climate and development goals and urged the IMF to adapt its lending toolkits to better serve its vulnerable G20 membership, given the fragmented global financial landscape.
At a press briefing, Kristalina Goergieva, Managing Director of the IMF, acknowledged the delays in the Common Framework but noted that progress had been made in the speed of reaching agreements among creditors.
She cited instances of time taken for creditor agreements for countries like Chad, Zambia, Sri Lanka, and Ghana, emphasizing that debt restructuring required all creditors' agreements due to the complex nature of creditors in each case.
Goergieva recommended a case-by-case approach, forming a Creditors' Committee, while the IMF and World Bank established the parameters for agreement.
She encouraged pushing for efficiency while maintaining the Common Framework, as losing it would result in a less predictable environment.
Many African economies are grappling with acute debt challenges, driven by social and infrastructure needs, the impact of the COVID-19 pandemic, the war in Ukraine, global financing conditions, and climate-related disasters, making debt restructuring vital for sustainable growth.
- Reporting by Francis Ntow: Editing by Adejoke Adewale
