Ghana bondholders told to take more losses to match UK, China
Ghana’s eurobond holders need to take more losses as the nation works to restructure debt to match payment cuts accepted by countries such as the UK and China, social-justice organizations said.
The debt relief currently discussed would lead to bondholders getting 15% more than bilateral creditors, London-based Debt Justice, formerly known as the Jubilee Debt Campaign, said in a statement with the Accra-based Integrated Social Development Centre.
Ghana’s bondholders must agree to a 50% reduction in debt payments if they are to match the terms received by the bilateral lenders, the non-governmental entities said.
The West African nation is restructuring almost all of its $44 billion obligations as part of conditions for a $3 billion International Monetary Fund program. The country, which completed a domestic debt exchange last year, is close to a final agreement with its bilateral lenders to rework $5.4 billion and expects to reach a permanent deal on revamping $13 billion of US currency bonds with investors by the end of June.
“Ghana’s negotiations with bondholders are at a crucial stage,” Debt Justice and Isodec said. “For a deal to be struck requires bondholders to give at least as favorable terms as government creditors, and for the IMF to say it meets their targets for debt relief.”
The IMF rejected an initial pact reached between Ghana and bondholders in April because it failed to show that it will help cut the country’s debt ratio to 55% of gross domestic product by 2028.
The April proposal would have seen bondholders repaid 71 cents for every dollar lent, whereas an agreement in principle reached between Ghana and its official creditors in January will return 62 cents for every dollar lent, the NGOs said.
Under the original terms of the debt, bondholders would have received $1.26 for every dollar provided, according to Debt Justice and Isodec.
“This means that for payments to bondholders to be reduced to 62 cents for every dollar lent – matching payments to governments – they would have to be cut by 50%,” they said.
Next Disbursement
Ghana, which is using the Group of 20’s Common Framework to reorganize its bilateral loans, last month received the draft memorandum of understanding from the official creditor committee. It is currently renegotiating some terms with the official creditors, after which an agreement consistent with the January in-principle pact must be signed.
Agreeing to an MOU will pave the way for the IMF to make its third disbursement of $360 million to Ghana, bringing the total amount received since the program started in May last year to $1.56 billion.
The G-20 framework expands the Paris Club of sovereign creditors to include China and other nations.
