Momentum builds on external debt restructuring efforts

The government is urgently seeking to build on the momentum of its debt restructuring efforts, following the recent agreement with official creditors to restructure debts extended to the country up until December 2022.

Having overcome this hurdle, Reuters reports that government officials will re-engage with its international bondholders from next week, seeking to continue discussions after Marrakech meetings last October concerning its US$13billion in outstanding Eurobonds.

Government reached a deal to restructure US$5.4billion of loans with its official creditors. The agreement with bilateral lenders including China and France was key to unlocking new International Monetary Fund (IMF) financing and will allow Ghana to access another US$600 million under its US$3billion bailout programme.

Finance minister, Ken Ofori-Atta, who spoke to Reuters at the World Economic Forum (WEF) annual meeting, also noted that officials will also travel to China on January 23.

The country aims to cut US$10.5billion from its external debt repayments and interest costs that were due from 2023 to 2026 and implement an IMF reform programme.

Ghana first sent “working proposals” for the debt restructuring to the official creditor committee in June 2023, having been locked out of international capital markets and seeing inflation spiral in the lead-up to its default.

Ghana is aiming to restructure US$20billion out of total external debt that was about US$30 billion at the end of 2022, according to a government presentation to investors.

The debt is being restructured under the Common Framework, a process set up during the COVID-19 pandemic by the Group of 20 economies.

Chad, Ethiopia and Zambia have also made debt relief requests under the platform, which has seen slow talks due to coordination issues and disagreements over assessing comparability of treatment between different types of creditors.

December default

Ghana defaulted on most of its overseas debt in December 2022 after debt servicing costs soared. It is looking to restructure US$20billion of external debt, which totalled about US$30billion at the end of 2022 and has already restructured most local debt.

Restructuring negotiations last year were a “very difficult, painful process,” but Ghana has “built pretty good momentum”, Ofori-Atta said.

The IMF board is due to meet on Friday to decide on a US$600million disbursement from Ghana’s bailout programme. Getting approval is usually seen as a formality once a meeting has been scheduled, and would unlock funding from other multilateral lenders.

The World Bank was expected to decide on US$550million of “sorely needed” funding on January 25, Ofori-Atta added.

Ofori-Atta said the 2022 macroeconomic situation had been “cage-rattling”, but was improving, and he pointed to a rise in revenue and a decline in inflation. The latest data showed consumer inflation had slowed to 23.2 percent year-on-year in December compared to the more than 50 percent when the country tipped into default.

Meanwhile, growth was running at 3 percent, more than twice the IMF’s projected rate of 1.2 percent, Ofori-Atta said.

 

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