Will China, BlackRock, others accept a debt restructuring programme from Ghana?
Ghana has commenced external debt restructuring discussions with its external creditors, Finance Chief Ken Ofori-Atta has said.
Making the disclosure on Monday, December 12, 2022, Finance Chief Ofori-Atta averred discussions with external creditors on a proposed external debt restructuring programme will intensify this week.
According to the Finance Chief, the external debt restructuring programme will affect both bilateral and individual creditors.
Ghana has over $28bn in external debts which it wants to restructure.
Of the $28bn, $13 billion is in Eurobonds with holders including major global asset managers such as BlackRock, Vontobel, AllianceBernstein, Neuberger Berman and PIMCO.
At the end of 2021, Ghana had $3.2 billion of bilateral debt, $6.3 billion with multilateral institutions of which $4.6 billion was with the World Bank.
Senior Lecturer at the University of Ghana Business School (UGBS), Professor Godfred Bokpin, has advised government to extensively engage external creditors on its external debt restructuring programme.
According to Prof. Bokpin, failure by government to extensively engage external creditors, will result in “complications” for the country.
Adding that, unlike domestic creditors (whose opposition to the DDEP is weak), external creditors will strongly oppose any external debt restructuring programme that has not been extensively discussed with them.
As Ghana kick-starts negotiations with external creditors – bilateral and individual/institutional creditors – on an external debt restructuring programme, one question that lingers is if external creditors will indeed accept a debt restructuring programme from Government, especially when China, a bilateral creditor to Ghana, somewhere in the middle of this year forgave loans in billions of dollars owed it by some 17 African countries.
From 2000 to 2010, the Government of Ghana was among the top 10 African government recipients of Chinese loans.
Angola, Ethiopia, Zambia, Kenya, Egypt, Nigeria, Cameroon, South Africa and Republic of Congo form the other nine top African government recipients of Chinese loans.
Reports indicate that, China has loaned more than $17 billion to Ghana for a variety of infrastructure projects from hydroelectric projects to broadband internet systems.
As China’s lending has grown, so has Ghana’s debt, putting the West African country at the top of a recent list of countries at risk of default..
Norvanreports believes that an acceptance of a debt restructuring by China, institutional creditors such as BlackRock and individual investors will be dependent on how “favourable” external creditors find the debt restructuring programme.
“Favourable” in the sense that, interest and principal cuts as well as tenor extension of debts are not very “hurtful” to external creditors.
Because, an unfavorable debt restructuring programme for external creditors, is likely to severely impact Ghana’s chances of raising long term capital from the international debt market in the short to medium term.
