Ghana’s external bondholders want interest payments linked to future GDP growth rates
Ghana’s Eurobond holders (private and commercial creditors) are requesting that the country link interest payments (coupon payments) on the bonds to future GDP growth rates.
Per the proposal put to the Finance Ministry, interest payments will increase should economic growth accelerate faster than targets set by the International Monetary Fund (IMF).
Ghana’s economy is expected to expand by some 2.8% this year, with growth accelerating to 5% in 2027 and 2028. The country’s economy expanded an average 6.9% between 2017 and 2019, before growing by 0.5% in 2020 due to the adverse impacts of the Covid pandemic.
The proposal made by Eurobond holders is in exchange for the acceptance of the 25% to 30% haircut on their investments as earlier proposed by the Finance Ministry.
Reports, however, have it that, the Finance Minister, Dr Amin Adam has opposed the proposal made by the private and commercial creditors.
The current impasse between Ghana and its bondholders may delay the country’s self-imposed deadline to finalize an accord needed to secure further payments from the IMF by the end of March.
Ghana began restructuring almost all of its debt a little over a year ago as part of an IMF deal. The country reached an agreement in principle with bilateral creditors in January to rework $5.4 billion of obligations, under the Group of 20’s Common Framework for Debt Treatment.
The focus now is on finalizing a pact with eurobond investors using the “comparability of treatment” guiding principle of the framework.
Ghana has received $1.2 billion from the IMF since its extended credit facility started in May, further disbursements, however, hinge on the progress of ongoing talks with private creditors.
