Ghana yet to make progress with G20 Common Framework Debt Treatment – World Bank

According to the World Bank's April 2023 Africa Pulse Report, Ghana has not yet made any headway with its bilateral creditors over the G20 Common Framework Debt Treatment.

It has not struck an agreement with its bilateral creditors, particularly the Paris Club, to make way for a program supported by the International Monetary Fund, despite claims from government sources to the contrary.

"Progress has not yet been accomplished because Ghana asked for a Common Framework debt treatment at the beginning of 2023. Ghana ran a voluntary domestic debt swap scheme in line with the Common Framework engagement. Other nations participated in external restructuring initiatives through bilateral discussions with bilateral donors and private creditors (Malawi).

”Yet, these efforts cannot replace a comprehensive and well-coordinated solution for countries in debt distress. High liquidity and solvency pressures may push more countries into an unsustainable situation that requires a comprehensive restructuring of their obligations”, it added.

Rising debt levels could worsen

The World Bank also said debt levels and vulnerabilities which remain high could worsen, especially for countries that have lost access to the credit market and are in or at risk of debt distress.

If not addressed, it stressed that debt dynamics could escalate into a full-blown crisis, setting countries even further back.

“The international community needs to find more adequate ways to speed up debt treatments. The current resolution mechanisms need to be strengthened so that they can effectively address a potential debt crisis, and additional instruments may need to be set in motion”, it added.

Policy recommendations

It therefore urged African economies including Ghana to increasingly rely on their own policy reforms and domestic space for action in three areas.

“First, restoring macroeconomic stability is essential for growth. Raising interest rates and avoiding policy conflicts that reduce the effectiveness of monetary transmission (say, fiscal dominance, and foreign exchange distortions) are crucial to reduce inflation to target levels.”

“Second, structural reforms that foster private investment should be at the top of the pro-growth policy agenda of countries in the region. A premium should be put on policy measures that boost long-term competitiveness—including actions to improve market contestability and promote a sound regulatory framework”, it explained.

“Third, African policy makers need to seize the opportunities that are available to them during the low carbon transition”, it concluded.