Ghana faces uphill battle in securing debt relief on $10.5bn external debt – Economist warns
Renowned political risk analyst and economist, Dr. Theo Acheampong, has raised concerns over Ghana’s ability to secure a substantial debt relief of approximately $10.5 billion from external creditors, including bilateral lenders. Citing the experiences of other countries such as Zambia, Dr. Acheampong suggests that Ghana’s path to obtaining $2.6 billion annually in debt relief over the next four years may prove to be challenging.
Ghana, recognizing the need for financial assistance, has already submitted a proposal outlining its debt restructuring plans to its official creditors. However, Dr. Acheampong warns that the country may not receive a favorable deal from these external creditors. In an interview with Africa News, he explains that Ghana aims to secure more than half of its $20 billion debt from external creditors, which translates to approximately $2.6 billion per year. However, based on the experiences of other nations, Dr. Acheampong expresses skepticism regarding Ghana’s ability to achieve this ambitious target.
One of the key challenges highlighted by Dr. Acheampong is Ghana’s significant exposure to Eurobonds and other commercial loans. He argues that this exposure, coupled with the complexities involved in negotiations with different creditor groups, will make the road ahead particularly arduous for the country. Dr. Acheampong emphasizes that Ghana’s goal of securing $2.6 billion in annual debt relief is unlikely to materialize based on the evidence from other countries that have embarked on a similar path.
Furthermore, Dr. Acheampong points out that the process is further complicated by the fact that most commercial creditors have obligations to their shareholders. He notes that Ghana has faced challenges in meeting its interest payment obligations on several debt obligations since December of the previous year, creating additional hurdles in the negotiation process. The economist also highlights Ghana’s indication of potential haircuts ranging from 30% to 50%, which he believes will be a bitter pill to swallow for many of the commercial creditors.
Meanwhile, the Ghanaian government has reportedly sent a proposal outlining its plans for debt restructuring to its official creditors. However, it is important to note that the “working proposal” submitted is not legally binding, according to Reuters.
As Ghana navigates the complex landscape of debt relief negotiations, analysts like Dr. Theo Acheampong warn of the challenges ahead. The country’s exposure to commercial loans, combined with the potential resistance from creditors and the impact of recent defaults on interest payments, adds to the complexities of the situation. As Ghana awaits responses from its official creditors, the outcome of the debt restructuring process remains uncertain, carrying significant implications for the country’s financial stability and long-term economic prospects.
