Caution advised as Ghana eyes international capital market return after successful debt restructuring
Ghana may soon regain access to international capital markets for new dollar borrowings, following a significant debt restructuring agreement.
The government has reached a deal to restructure approximately $13.1 billion in debt, a move that has garnered positive responses from some international investors and Eurobond holders.
For the past two years, Ghana has been unable to access international markets for dollar funding due to rising debt levels, slow economic growth, and a low balance of payment account. The government’s announcement of debt restructuring with commercial creditors led to its exclusion from these markets.
However, recent measures to protect investors’ funds and the completion of the debt restructuring are expected to restore market confidence.
Despite this progress, some financial observers caution against hastily returning to capital markets for dollar borrowings, given Ghana’s high debt levels.
They argue that such actions could negatively impact the economy, recalling that excessive borrowing previously forced Ghana to seek a bailout from the International Monetary Fund (IMF).
As part of the debt restructuring, Eurobond holders are expected to forgo approximately $4.7 billion owed by the government. Additionally, the bondholders will provide a cash flow of $4.4 billion during the IMF program period, which is crucial for restoring debt sustainability.
The government has proposed two options for investors under the new deal: the P.A.R and Disco options. Investors choosing the Disco option will receive three new bond instruments, while the P.A.R option will have a cap of up to 1.6 billion cedis.
