Economist, Professor Godfred Bokpin, says Ghana is not merely looking for debt restructuring, but also assurance of continuous fiscal support.

According to him, with Ghana currently locked out of the Eurobond international capital market, it has become important that the government fosters these bilateral relations with creditor nations in order to be able to finance its activities.

This, he says, makes China – which currently holds more than 40% of Ghana’s external debt – a very significant partner.

He explained that China has over the past 20 years strategically positioned itself to becoming a major contributor to infrastructure development on the continent, and with the Paris Club creditors currently focusing on the Russia-Ukraine war and the energy crisis among other domestic issues, China’s approval and assurance to continue supporting Ghana becomes really critical.

“So we’re not just asking for China to forgive us of their debt, we’re also asking for China to step up to the plate again in helping Ghana to close the funding gap. Why is that important? If you look at the way the IMF has worked over the years, if you look at the IMF programme, it will take more than the IMF itself could provide in translating the programme objectives into actual. So you actually need more than 3 billion dollars when you cost the IMF programme,” he said on JoyNews’ PM Express.

He further explained that with the government also out-priced from the domestic capital market, it needs to foster these bilateral funding relations in order to fill its huge budget deficit.

“If you look at the 2023 budget, it has a huge fiscal deficit. The fiscal deficit tells you the borrowing requirement of the government. Now, given that the government has lost market access on the Eurobond international capital market, then again from the domestic market in terms of the medium to the long term earn, we’ve been priced out.

“Government has no means of financing the deficit. The only option left now is more of the short term; Treasury bills and Bank of Ghana actually monetising the deficit. You’ve seen already that the IMF has sent a signal that they will not tolerate the continuous monetizing of the deficit by the Central Bank because of the inflationary pressures that it creates.

“So what that tells you is that once we’ve lost market access, and there’s no indication that by the end of this year or next year Ghana is going to go to the Eurobond market. So beyond that it means that beyond restructuring your debt, you also need assurance of commitment from these development partners, mostly bilateral, that in agreeing to restructure the debt or debt forgiveness in addition to forgiveness of sins, they’re going to provide additional funding in closing the gap. And that is how come China is so critical,” he said.