Ghana has struck a preliminary IMF deal and halted debt payments

Ken Ofori-AttagdpIMFGDPIMF, Ghana’s finance minister, is fond of invoking scripture in speeches on the economy. Recently, as the country defaulted on its domestic debt, he found solace in the first book of Samuel saying “nothing will be lost, nothing will be missing.” Yet the Bible is a poor guide to macroeconomics. Holders of domestic bonds stand to lose a good chunk of money. Now foreign creditors are getting a buzz cut, too. On December 19th Ghana suspended interest payments to foreign creditors, in effect defaulting, pending talks.It has also appealed to the high priests of economic orthodoxy, agreeing to a preliminary $3bn bail-out (about 4% of ) from the . It needs the help. is above 100% of and local and foreign interest payments eat up 70-100% of revenue, according to Mr Ofori-Atta. Inflation is running at 50% and the central bank has raised its main interest rate to 27%. In past crises Ghana has wisely to head off trouble and avoid spending cuts that were too painful. This time, however, it dallied for so long that austerity alone will not save it.