Ghana: 2032 Eurobond extends decline by 0.5% as bilateral debt restructuring delay
Ghana’s Eurobonds experienced a continued decline on Wednesday, March 1, 2023, following the country’s failure to meet a self-imposed deadline to restructure its bilateral debt. This, coupled with S&P Global Ratings’ recent warning to bondholders about larger losses than previously anticipated, has triggered a further drop in the nation’s 2032 dollar securities, which fell 0.5% to 36.8 cents in the dollar by 8:18 a.m. in London.
The decline brings the total drop for the week to 1.7%, signaling mounting concerns among investors about the country’s economic situation.
Ghana’s Finance Minister, Ken Ofori-Atta, had sought to reach a restructuring agreement with bilateral creditors by the end of February 2023 to qualify for a $3 billion International Monetary Fund (IMF) program. The restructuring agreement would have been a significant boost for Ghana’s economy and would have provided much-needed relief for the country’s struggling debt situation.
However, as of now, Ghana has only partially completed the domestic-debt part of the exchange program, signaling a delay in the country’s recovery efforts.
Adding to the country’s economic woes, S&P Global Ratings recently warned that Ghana may have to request external creditors to write off as much as 50% of the debt owed to them, significantly higher than the 30% that the government initially considered. Such a write-off would result in greater losses for bondholders than previously anticipated, and this news has further weighed on Ghana’s Eurobonds, making them a less attractive investment option.
Ghana’s economic situation has been struggling over the past few years, and these recent developments are likely to further impact the country’s prospects. The COVID-19 pandemic has had a severe impact on the economy, reducing demand for its primary exports, including oil, cocoa, and gold. Ghana’s government has also been grappling with its fiscal deficit, which has increased significantly due to the pandemic’s impact on the economy.
The country’s high debt levels have also been a cause for concern, with the World Bank warning that Ghana’s debt-to-GDP ratio could reach 85% by the end of 2023. This has led the government to embark on a debt restructuring program to ease its debt burden and attract foreign investment. However, the delay in the bilateral debt restructuring program has slowed down these efforts and raised concerns among investors.
The continued decline in Ghana’s Eurobonds reflects mounting concerns among investors about the country’s economic prospects. While the government has been taking steps to ease its debt burden, recent developments have slowed down these efforts, leaving investors uncertain about the country’s economic recovery. The government must take swift action to address these challenges and reassure investors that it is committed to long-term economic stability.
