Ghana is yet to make progress with the G20 Common Framework Debt Treatment with its bilateral creditors, the World Bank April 2023 Africa Pulse Report has revealed.

This is contrary to government sources that it has reached an agreement with its bilateral creditors, particularly the Paris Club to pave way for an International Monetary Fund-support programme.

“Ghana requested a Common Framework debt treatment in early 2023; hence, progress has yet to be made. In conjunction with the Common Framework engagement, Ghana conducted a voluntary domestic debt exchange programme. Other countries engaged with private creditors and bilateral donors engaged in external restructuring efforts through bilateral engagements (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.