Some Civil Society Organizations (CSOs) in Ghana have called for the country’s debt to be canceled, rather than an International Monetary Fund (IMF) loan bailing out private lenders.
In a statement released on Wednesday, July 13, the CSOs stated that any IMF loan must include debt cancellation to make Ghana’s debt sustainable.
Ghana recently entered negotiations with the IMF on a new loan. Ghana is in a debt crisis with public spending falling and high inflation caused in part by the global food and fuel crisis.
The statement added that the rising value of the dollar is increasing debt repayments and 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 the 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 added that “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 canceling Ghana’s debt.”
The CSOs included the Integrated Social Development Centre (ISODEC), Caritas Ghana, ActionAid Ghana, Faith in Ghana Alliance, Tax Justice Coalition Ghana and the AbibiNsroma Foundation.
International supporters of the statement include Caritas Africa, Debt Justice UK, 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, 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.
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.
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.