Gov’t initiates talks to restructure $13 billion debt
The government of Ghana has commenced negotiations with Eurobond holders and commercial creditors in London in an effort to restructure its $13 million debt, according to information obtained by Investment Times/Business 24.
The discussions also aim to engage institutional investors holding these financial instruments, as the government proposes a substantial 40% interest rate reduction on these bonds. Finance Minister Ken Ofori Atta has expressed his optimism about finalizing negotiations with bilateral and commercial creditors, as well as Eurobond holders, by the end of March 2024.
Ofori Atta outlined details of the proposed deal, stating that the payments owed on $5.4 billion of bilateral obligations would be repaid in two tranches, spanning 16 and 17 years, based on the terms agreed upon last week. This revelation marks the first public disclosure of these specifics.
Addressing the World Economic Forum in Davos, Ofori Atta emphasized that the agreement with official creditors serves to “build momentum and confidence” for the overhaul of Eurobond debt. He stressed a global sense of urgency and the acknowledgment that Ghana has fulfilled its part in the process.
Ghana’s Eurobonds experienced a notable performance in the market, emerging as top performers in an index of frontier and emerging market sovereign dollar debt. Bonds maturing in 2027 demonstrated an extended positive streak, rising to 45.46 cents on the dollar, marking its longest upward trend in nine days since February 2022.
Ofori Atta disclosed that the pact with official creditors, announced on January 12, entails debt payments from 2023 being repaid in 2039 and 2040, with debt service due in 2024 scheduled for repayment in 2040 and 2041. The forbearance is set to last for the duration of Ghana’s program with the International Monetary Fund, concluding in May 2026.
Regarded as one of the swiftest restructuring processes under the Group-of-20 Common Framework for Debt Treatment, Ghana’s debt restructuring pact has garnered praise. Notably, Ethiopia and Zambia are also navigating debt restructuring efforts following a similar template.
Having suspended payments on a substantial portion of its external debt just over a year ago, Ghana’s proactive approach in finalizing the pact within a year has been recognized, and it contrasts with the proposed terms in October, including a 40% haircut for dollar bond investors and the issuance of new instruments. Ofori Atta affirmed that the terms of the Jan. 12 official creditors agreement would now influence the restructuring terms.
The International Monetary Fund’s board approved a first review of Ghana’s loan programme last Friday, allowing for the immediate disbursement of about $600 million under its $3 billion bailout programme.
