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Accra is trying to navigate the east-west geopolitics of debt negotiations
'Great progress and on all fronts', was finance minister Ken Ofori-Atta's verdict following two days of meetings with Chinese counterparts in Beijing, with the finance ministry briefing reporters that it expected to secure financing assurances from the Chinese government 'very soon'.
Ghana secured a staff-level agreement from the IMF in December for a US$3 billion bailout but has to restructure its obligations to other lenders to bring them within the fund's definition of 'sustainability' (AC Vol 64 No 1, Ructions over debt deal hold up IMF bailout). Only when Ghana has agreed on restructuring terms with its domestic and foreign creditors will its $3bn financing facility be discussed by the IMF board.
China holds around $1.9bn of Ghana's debt, according to Ofori-Atta's ministry.
That makes it an important litmus test for the prospects of debt relief and restructuring as a war of words breaks out between Beijing and Washington about the role creditors should play in resolving the serial financial crises in developing economies.
United States officials such as Treasury Secretary Janet Yellen have lambasted China for blocking debt restructuring talks. Some of her colleagues have gone further, accusing Beijing of 'debt-trap' diplomacy, that using financial obligations as political leverage.
Beijing has shot back with its own accusations against western-based commercial creditors for refusing to join multi-lateral debt restructurings. It is also demanding that the IMF and the World Bank should be prepared write off a proportion of developing country debt to assist the restructuring programmes.
Initially, Beijing was refusing to make concessions in debt talks with countries such as Sri Lanka, Zambia and Ghana – until the IMF and the World Bank agreed to debt write-offs. That position may be changing following Beijing's relaxation of its strictures in negotiations Sri Lanka as that country negotiates a $3bn bailout witht the IMF.
Neither Beijing nor Washington want to be held up as the governments blocking debt workouts in developing economies. As their bilateral disputes grew shriller, financial conditions in many economies in Africa and Asia have plummeted this year.
A senior UN official told Africa Confidential that concern is growing over the 'domino effect' in West Africa of serial financial and security crises.
'It is not just finance and debt rescheduling, the minute a country finds itself unable to finance imports the political process gets distressed and very quickly becomes a political or social crisis,' the official said.
'This is the domino effect that we need to prevent from happening.'
Keynote discussions on new debt relief schemes are due at the spring meetings of the World Bank and IMF on 10-16 April. China and private creditors will have to be part of those discussions if they are to produce a workable plan.
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