Ghana faces delays and complexities in debt restructuring talks with private creditors, warns the EIU
Ghana’s Finance Minister, Ken Ofori-Atta, aims for negotiations with Eurobond holders and commercial creditors, seeking a 40% haircut on coupons. However, The Economist Intelligence Unit (EIU) cautions that talks with private creditors may be intricate and unlikely to conclude by mid-2024.
In a statement on the Africa Outlook 2024, Benedict Craven, Principal Economist at EIU, expressed doubts about the ease of negotiating with private creditors. He highlighted the challenges faced by countries with complex creditor profiles, citing setbacks in every stage of restructuring for nations like Ghana and Zambia.
Mr Craven emphasized that the optics of delays could have ripple effects on other sovereigns with high-risk implications. He suggested that concealing the impending default might be more prudent than pursuing early debt treatment.
While acknowledging the possibility of Ghana and Zambia setting precedents if they expedite negotiations, he highlighted fundamental disagreements among various creditor groups and official creditors. The slow process, he warned, could leave economies in limbo for extended periods, especially if the common framework route is taken.
The Economist Intelligence Unit also raised concerns about the compatibility of debt treatment acceptable to private creditors and official creditors, even if a deal is reached. He cited the G20 framework, noting that approval from official creditors does not guarantee compatibility with private creditors, potentially leading to further delays.
“One of the issues that have cropped up in the G20 framework is that even if you get the deal among the official creditors who get classified, there’s no guarantee that there’ll be a compatibility of [debt] treatment that’s acceptable to private creditors and vice versa.”
“So in Zambia’s case, the private creditors can come up with a deal and can be rejected by official creditors. It’s issues like this that is really going to contribute to the slow process every time creditors are confronted with a different debt profile from a different sovereign”, he stated.
Finance Minister Ken Ofori-Atta however, remains optimistic, urging negotiations in good faith to expedite Ghana’s return to financial stability. Despite this optimism, the cautionary note from The Economist Intelligence Unit underlines the intricacies and challenges ahead in Ghana’s debt restructuring efforts.
