Ghana set to start debt-restructuring talks for local bonds
Ghana is set to begin talks with domestic bondholders on restructuring its local currency debt as part of the West African nation’s plan to secure a $3 billion loan from the International Monetary Fund. The country’s Eurobonds declined.
The country’s biggest debt investors, including local banks and pension funds, are preparing to join discussions on debt restructuring that could extend maturity and haircuts on principal and interest payments, according to people familiar with the matter, who have Asked not to be identified because they are not authorized to speak publicly.
The restructuring will be part of a debt-stability plan required by the International Monetary Fund, the people said, and will include Ghana’s share of $19 billion in outstanding local debt.
Ghana began engaging the IMF in July for a $3 billion three-year expanded credit facility program after efforts – including cutting discretionary state spending by up to 30% – failed to prevent a sell-off in its Eurobonds. remained and stopped a record depreciation. Cedi currency against the dollar.
The African nation joins several emerging markets that are being forced to default or renegotiate some of their loans this year. Economies around the world are burdened with heavy food and fuel costs, which disproportionately burden low-income economies plagued by protests and political chaos.
One of the people said that the country’s debt restructuring will initially focus on domestic bonds, although external liabilities could also be included, depending on how well Ghana needs to service its debt-servicing to achieve fiscal stability.
How much will the cost have to be reduced? People said the exercise would focus on easing the country’s interest-paying burden, and whether it requires a cut in principal, interest or both will be the subject of meetings between the government and bondholders in the coming weeks. .
Simon Quijano-Evans, a London-based economist at Gemcorp Capital, said: “Given the complexities involved, it is probably fair to say that the investor community assumed that local currency bonds would not be involved in any restructuring.”
“And much more, as it would raise questions about any possible recapitalization of local banks holding domestic bonds. But since the IMF released its document on Zambia, it seems that some doors have opened.”
Ghana’s 2026 eurobond fell 1.5% to 60.01 cents on the dollar on Tuesday. Debt has declined 34% this year, taking the yield to 27.06%.
The IMF has not yet “fully updated” Ghana’s fiscal position, the organization said, after a stability assessment last year required the country to have a “rigorous and credible” plan to “keep the debt on a declining trajectory”. and ensure access to the market.” ,
An IMF spokesperson said in an emailed response, “In cases where a country’s debt is assessed as unstable, the IMF is barred from providing financing until members are able to restore debt stability, does not take steps, including seeking debt restructuring from its creditors.” Bloomberg question. Spokesmen for Ghana’s finance ministry and central bank did not immediately comment when contacted by phone.
Investors demand a premium of 2,190 basis points over the US Treasury to hold Ghana’s Eurobonds, compared to an average of 878 for African issuers, effectively shutting the world’s second-largest cocoa producer from international capital markets. has gone.
The cost of insuring a Ghanaian loan against non-payment using a credit-default swap has risen by nearly 5,000 basis points from a low of 1,000 in January.
The Cedi has lost 39% of its value against the dollar this year, making it the second worst-performing currency in the world after the Sri Lankan rupee.
Ghana’s debt-servicing cost in the first half was 20.5 billion cedis ($2 billion), which, according to budget figures, accounts for 68% of tax revenue. Government debt rose to 393.4 billion cedis, or 78.3% of GDP, by the end of June.