Bank of Ghana’s Governor Calls for Increased Private Sector Involvement in G20 Debt Relief Framework
Bank of Ghana's Governor Calls for Increased Private Sector Involvement in G20 Debt Relief Framework
- Ghana has successfully completed its Eurobond debt exchange program
- The AfDB estimates that Africa requires up to US$170 billion annually for infrastructure
- These arrangements allow countries to reduce their debt burdens
Dr. Ernest Addison, Governor of the Bank of Ghana, has emphasized the urgent need for increased private sector engagement in the G20 Common Framework for Debt Treatments.
During the October 2024 Africa Caucus Meeting with the International Monetary Fund (IMF) Managing Director, held amid the IMF/World Bank meetings in Washington, DC, Dr. Addison highlighted that incorporating private creditors is essential for expediting debt relief and ensuring fair treatment for all stakeholders.
“The Global Sovereign Debt Roundtable (GSDR) must facilitate swift, equitable, and effective debt resolutions, whether under or outside the G20 Common Framework, focusing on timely relief for the most vulnerable nations,” he stated. “We advocate for greater private sector participation in this framework to ensure comparability of treatment and quicker progress on debt resolution initiatives.”
Established in 2020, the G20 Common Framework aims to assist low-income countries grappling with unsustainable debt, particularly in the aftermath of the COVID-19 pandemic.
While it has primarily addressed the restructuring of official debts owed to sovereign states, private sector creditors have largely been excluded from the discussions.
Ghana has successfully completed its Eurobond debt exchange program, converting approximately US$13 billion in Eurobonds into new bonds.
This effort resulted in a 37 percent reduction in debt, amounting to US$5 billion, and provided US$4.3 billion in debt service relief from 2023 to 2026, with interest rates dropping from over 8 percent to below 5 percent.
Notably, Ghana has restructured more than 90 percent of its eligible external debt.
This success follows the earlier completion of the Domestic Debt Exchange Programme (DDEP) in 2023, which involved restructuring around GH¢203 billion of domestic debt and reaching an agreement on restructuring approximately US$5.1 billion of bilateral official debt.
Addressing Africa’s ongoing debt crisis, Dr. Addison pointed out that over half of sub-Saharan African nations are either at high risk of debt distress or already facing it, according to the African Development Bank (AfDB).
The AfDB estimates that Africa requires up to US$170 billion annually for infrastructure, with a financing gap of up to US$108 billion. Since the early 2010s, the increasing ratio of interest payments to revenue has undermined investments in essential services.
Dr. Addison noted that the pandemic, rising global inflation, and geopolitical tensions have exacerbated the fiscal challenges, pushing many African nations toward instability. He stressed the critical need for prompt and comprehensive debt restructuring to avert a potential economic collapse in the region.
“Swift, fair, and effective debt resolution under or outside the G20 Common Framework is vital for providing timely relief to the most vulnerable countries,” he asserted, adding that private sector involvement is crucial to achieving comparability of treatment—ensuring all creditors, both public and private, are treated equally in restructuring discussions.
This principle aims to prevent scenarios where official creditors provide debt relief while private creditors hold out for better terms, potentially complicating negotiations. “African economies require a fair process in which all creditors, including private ones, contribute to solutions,” Dr. Addison stated.
He highlighted that including private creditors will not only enhance fairness but also streamline the restructuring process, which often suffers from prolonged negotiations and varying priorities among creditor groups.
In addition to advocating for private sector participation, Dr. Addison proposed innovative financing mechanisms such as debt-for-climate swaps. These arrangements allow countries to reduce their debt burdens in exchange for commitments to climate-related projects, thereby addressing both financial and environmental challenges.
“Debt-for-climate swaps could effectively engage private creditors, especially as the global focus increasingly shifts toward climate action,” he noted, emphasizing that such mechanisms could also help African nations build resilience against climate change while mitigating their debt vulnerabilities.
