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Ghana expects $3bln IMF loan approval early in 2023

The International Monetary Fund logo is seen inside the headquarters at the end of the IMF/World Bank annual meetings in Washington, U.S., October 9, 2016. REUTERS/Yuri Gripas/File Photo

The International Monetary Fund (IMF) is poised to lend Ghana $3 billion as the African nation grapples with its worst economic crisis in a generation, Finance Minister Ken Ofori-Atta said on Tuesday.

Ghana’s determination not to seek the fund’s help for a 17th time crumbled in July after soaring inflation spurred widespread street protests.

IMF board approval of the proposed three-year loan is expected “early next year”, Ofori-Atta said.

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“We pray that this will be the last (support needed). That is why the programme will be that strong,” he told reporters.

Ofori-Atta described the speed at which the agreement was reached as a “miracle”, adding that the government is ready to complete actions required by the fund before the end of January.

Spending cuts and more measures to boost government revenue are not enough to address Ghana’s economic challenges and national debt, Ofori-Atta said, adding that external debt-restructuring discussions are ongoing.

The IMF executive board will approve the $3 billion loan package only if Ghana undergoes a comprehensive debt restructuring, the IMF’s Mission Chief for Ghana Stephane Roudet said at Tuesday’s news conference.

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Ghana’s debt reached 467.3 billion cedis ($43.5 billion) in September.

Reuters reported exclusively on Friday that Ghana and the fund were expected to reach a staff-level agreement.

A stream of heavily-indebted countries have been forced to go to the IMF this year, including Sri Lanka, Pakistan, Egypt and Tunisia, as the rapid rise in global borrowing costs and soaring energy and food prices in the wake of Russia’s war in Ukraine have made government debt increasingly unmanageable.

Ghana’s government began restructuring its domestic debt last week by rolling out a plan to swap $10.5 billion in local bonds for new ones.

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It has not yet laid out a strategy for its foreign debt, including $13 billion of Eurobonds that have traded at less than 50 cents on the dollar for months. Sources said that was the final hurdle to clinching a deal with the IMF.

Jerome Kuseh, a financial analyst at CediTalk in Accra, said Tuesday’s news represented a “vote of confidence” by the IMF in the government’s fiscal consolidation plan.

“This should strengthen the government’s position in further negotiations with creditors and encourage them to push through new revenue measures including a VAT increase from 12.5% to 15%,” Kuseh said.

Ghana’s sovereign dollar bonds rallied on the news, with the 2026 bond making the largest gains, adding more than 3 cents in the dollar to trade at 43.8 cents, Tradeweb data showed.

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The cedi , which had lost almost 59% of its value against the dollar this year, jumped more than 11% at one point to hit 10.2 to the dollar for its strongest since mid-October.

Government spending cuts and several increases to central bank interest rates had previously failed to tame inflation and stem the cedi’s fall.

Not all investors were optimistic about the IMF deal, saying that board approval could be months away.

“We need to see what is realistic in terms of the Ghanaians’ ability to deliver on structural reforms,” said Matt Vogel, a portfolio manager at FIM Partners, adding that it would require a lot of fiscal discipline and that it remains unclear exactly what will be required from the external debt restructuring.

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“There are still a number of things that have to fall into place for us to be to interested in investing,” Vogel said. “For me, very much the jury is still out.”

($1 = 10.7500 Ghanian cedi)

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