Ghana nears milestone agreement with external creditors for foreign debt restructuring, says EIU
The Economist Intelligence Unit (EIU) has released a report titled “Outlook for Global Sovereign Credit Risk,” in which it predicts that Ghana will reach an agreement with its external creditors in the coming weeks for the restructuring of its foreign loans.
This forecast is seen as positive news for Ghana, as it will allow the country to proceed with its external debt restructuring plans. The UK-based firm notes that Ghana has made progress in its negotiations for external debt restructuring.
Ghana had requested a bilateral debt restructuring under the Common Framework for Debt Treatments supported by the G20 in December 2022. In June of the current year, the Ghanaian government sent a non-binding working debt-restructuring proposal to official bilateral creditors, marking the start of a negotiation process that the EIU anticipates will conclude in the coming weeks.
The report also mentions that in 2022, six countries defaulted on their loans, including Ghana, Mali, Sri Lanka, Russia, Ukraine, and Belarus. The reasons for these defaults varied, with some stemming from geopolitical factors like Russia’s invasion of Ukraine and others due to domestic economic imbalances or policy mismanagement.
The EIU further highlights that a number of countries are expected to experience debt defaults in the current year, with many of these countries being in Africa. It attributes this trend to high levels of indebtedness, significant external debt-service burdens, and strained public finances in African economies.
The report notes that prior to the pandemic, many African countries took advantage of low-cost international credit for budgetary and balance of payments support, resulting in the accumulation of substantial external debt. However, the recent rise in interest rates has significantly increased the costs of servicing this debt.
The EIU’s report suggests that Ghana is likely to secure an agreement with its external creditors for the restructuring of its foreign loans in the near future. It also highlights the challenges faced by African economies due to high debt levels and increased debt-servicing costs.
