Serrari Group

Ghana has reached a significant agreement in principle with its bondholders to restructure $13 billion of its international debt, sources told Reuters on Thursday. This agreement follows a recent accord with the country’s official creditors, providing a crucial step towards stabilizing Ghana’s financial situation.

The restructuring deal will require bondholders to accept a reduction in the principal amount of up to 37% and extend the maturity dates of the bonds, according to informed sources. This move is expected to alleviate some of the financial pressures on Ghana, which defaulted on the majority of its $30 billion external debt in 2022 due to the impacts of the COVID-19 pandemic, the war in Ukraine, rising global interest rates, and increasing debt levels.

Ghana pursued debt treatment under the G20 Common Framework, a process designed to facilitate quick debt restructuring and involve China, the latest major bilateral lender. Zambia’s recent approval of its debt restructuring under the same framework provided a hopeful precedent for Ghana.

“An announcement could be made as early as next week,” one source, who requested anonymity, said. Another source suggested the announcement might come as soon as Friday.

Formal talks began in mid-March with two groups of bondholders: Western asset managers and hedge funds, and regional African banks. The negotiations stalled in April when the proposed deal did not meet the International Monetary Fund’s (IMF) debt sustainability analysis requirements. This led to a re-evaluation based on a revised IMF framework for Ghana.

Earlier this month, Ghana reached an agreement with its official creditor committee, paving the way for the IMF Executive Board to review the country’s $3 billion, three-year loan package on June 28. This review could lead to the release of the next tranche of $360 million.

The latest agreement with bondholders marks a crucial step in Ghana’s economic recovery efforts, aiming to stabilize the nation’s financial footing and support sustainable growth. The Finance Ministry of Ghana and the Paris Club, an alliance of major creditor nations, were not available for immediate comment.

This restructuring agreement underscores the collaborative effort between international stakeholders to address Ghana’s financial challenges and supports the country’s path toward economic revitalization.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

21st June, 2024

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