GHANA has reached a preliminary agreement with its bondholders to restructure $13bn in international debt, according to three sources who spoke to Reuters. This follows a recently finalised deal with official creditors.
Key agreement details:
- Bondholders will face a principal haircut of up to 37 percent.
- Bond maturities will be extended.
- Ghana’s dollar bonds surged on the news, with the 2027 bond hitting its highest price since 2022, as per Tradeweb data.
Background
In 2022, Ghana defaulted on most of its $30bn international debt due to the financial strain caused by the Covid-19 pandemic, the war in Ukraine, and rising global interest rates. These factors exacerbated years of overspending, pushing the West African nation into a financial crisis.
G20 Common Framework
Ghana, like Zambia, engaged in the G20’s ‘Common Framework’ to facilitate quick debt restructuring and include new large bilateral lenders like China. Zambia has been finalising its restructuring, and Ghana is reportedly close to an announcement, potentially as soon as Friday, sources indicated.
Official sector agreement
Earlier this month, Ghana finalised an agreement with its official sector creditors, initially struck in January. This paved the way for the IMF executive board to consider a second review of Ghana’s $3bn, three-year loan package, scheduled for June 28, which could release the next $360 million tranche.
Analysts’ perspective
Banking analysts at Tellimer noted that the 37 percent write down for bondholders is likely at the ‘upper-end’ of expectations. Ghana began formal talks in March with two bondholder groups: Western asset managers and hedge funds, and regional African banks. However, negotiations stalled in April when the proposed deal did not meet the IMF’s debt sustainability criteria. The plan has since been adjusted to fit a revised IMF framework shared with bondholders, leading to the current agreement in principle.
Next steps
An official announcement on the restructuring deal is expected imminently, possibly by next week, marking a significant step towards resolving Ghana’s financial challenges and stabilising its economy.
