In light of the challenging global situation that exists today, Dr. Ernest Addison, Governor of the Bank of Ghana (BoG), has indicated that more International Monetary Fund (IMF) support would be essential.
The Governor was speaking earlier this week at the IMF-African Caucus Meeting in Morocco under the theme “Making Public Debt Useful for Sustainable Growth in Africa”.
According to him, African economies were faced with acute debt challenges, underscored by rising social and infrastructural needs, amid spillovers from the Covid-19 pandemic, the war in Ukraine, tightening of global financing conditions, and climate-related disasters.
“The resultant increased debt service burden, together with complex creditor composition,
has heightened risks to debt sustainability, to the extent that more than half of the SSA members
are now in or at high risk of debt distress,” he bemoaned.
This challenging environment, Mr. Addison said, has led to another year of moderated pace of economic recovery, as sub-Saharan Africa (SSA) growth is projected to further decelerate in 2023.
This, he added that, while members of SSA remain committed to implementing relevant policies and reforms towards enhancing fiscal discipline with the aim of restoring debt sustainability and fostering inclusive and sustainable growth in the continent, “a much stronger IMF support would be crucial, amid the current challenging global environment”.
It was against this backdrop that the Governor suggested that, “given the fragmented global financial architecture, we urge the IMF to remain steadfast and adapt its lending toolkits to changing global conditions to serve its vulnerable membership better”.
Mr. Addison further indicated that it was for this reason that the members restated their request for increased concessional financing by aligning PRGT access thresholds with those of the GRA to ensure uniformity of treatment.
In addition, he called on the Fund to relax the PRGT eligibility criteria to foster access to adequate Fund support while reducing, suspending, or eliminating entirely surcharges for most vulnerable PRGT-eligible members facing acute debt challenges.
“We also reiterate our call for additional pledges from willing donors to close the gaps in PRGT resources. We further stress the criticality of a successful completion of the ongoing 16th GRQ to reinforce IMF finances while protecting the quota share of the vulnerable members” the Governor reiterated.
He again proposed that strengthening multilateral coordination and efficiency of regulatory framework for debt resolution in LICs, through a formidable Global Sovereign Debt Roundtable
(GSDR), was paramount.
While welcoming the latest developments on Zambia and Chad, Dr. Addison underscored the need to revamp 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).
In this regard, he called for a carefully designed debt resolution mechanism, especially, for vulnerable members with large- domestic creditors (as in the case of Ghana) to help avert domestic financial market instability.
“Improving debtor-creditor engagements through an enhanced GSDR while strengthening technical support to foster common understanding of all debt issues is macro-critical to bolster a swifter, proactive and systematic restructuring.
We also reaffirm the request for debt standstill during times of negotiations to offer immediate relief to debtors and restate our request for multilateral debt cancellation for the most vulnerable members facing acute debt challenges,” Ernest Addison advised.
Furthermore, he argued that an enhanced IMF’s cooperation with MDBs/RDBs is necessary to facilitate timely provision of MDBs/RDBs’ financial assistance for members facing significant debt and growth challenges.
He restated the call for new SDR allocation through the MDBs/RDBs’ (including AfDB), given their multiplier effects in achieving climate and development goals.
In order to prevent unintentional financing consequences for vulnerable members in Africa, the Governor asked that the Fund use its close relationships with G20 members to advocate for better lending terms from the ongoing design and implementation of the G20 Capital Adequacy Framework (for MDBs).
