Ghana’s Strategic Debt Relief and Restructuring Plan

Ghana’s Strategic Debt Relief and Restructuring Plan

Ghana has successfully negotiated a critical debt moratorium with its official creditors, securing a delay in its debt payments until May 2026. This pivotal agreement is part of the country’s broader strategy to restructure its $13 billion in Eurobond debt, aiming for a comprehensive overhaul before the conclusion of March 2024. The moratorium offers a temporary reprieve, enabling Ghana to defer specific loan payments during this challenging period.

Ken Ofori-Atta, Ghana’s Finance Minister, shared details of the arrangement in an interview at the World Economic Forum (WEF) in Davos. According to Ofori-Atta, the new terms of the agreement involve pushing back repayment timelines on $5.4 billion worth of bilateral debts, extending them over periods of 16 to 17 years. He emphasized that this step is designed to boost confidence and momentum, laying a strong foundation for negotiations with Eurobond investors to restructure their debt.

The revised payment schedule has provided Ghana with the much-needed financial relief. The nation’s official creditors have agreed to extend debt repayments, now due between 2023 and 2026, until 2039 and 2040. Furthermore, a portion of the debt originally due in 2024 will be rescheduled for settlement in 2040 and 2041. These measures are expected to ease the country’s immediate fiscal pressure while paving the way for sustainable debt management in the long run.

In a previous move, in December 2022, Ghana halted payments on much of its external debt, including the $13 billion Eurobonds, signaling the onset of its debt restructuring journey. In October 2023, the government proposed a significant 40% haircut for holders of its dollar-denominated bonds, along with a plan to issue new securities with extended maturities of up to 20 years and a 5% interest rate. However, the terms of these proposals will now be adjusted in light of the recent moratorium with Ghana’s official creditors.

In another notable development, Ofori-Atta revealed that Ghana has successfully negotiated a shift in the cutoff date for eligible loans subject to restructuring. Originally set at March 2020, this date has now been extended to December 2022, providing Ghana with additional time to engage more effectively with its bilateral lenders. As part of this arrangement, the government also secured an exemption from debt servicing obligations for $2.8 billion of its bilateral debt from 2023 through 2026, further reducing its financial burden.

While the negotiations were not without their hurdles—particularly in dealing with China and other bilateral creditors—Ofori-Atta expressed satisfaction with the outcome. He noted that all parties have achieved their goals through this cooperative process, underscoring the importance of collaboration in addressing Ghana’s pressing debt issues.

As a result of these agreements, Ghana has unlocked crucial financial support, including a disbursement of $600 million from the International Monetary Fund (IMF) under the country’s ongoing $3 billion IMF program. This injection of funds will be complemented by an additional $550 million from the World Bank, providing a much-needed boost to the country’s economic resilience as it continues its debt restructuring efforts.

With these key agreements in place, Ghana is now better positioned to achieve a more sustainable debt profile, facilitating long-term economic stability and growth. The restructuring plan represents a vital step in the country’s efforts to regain fiscal health and restore investor confidence.

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