Ghana’s government aims to reach an agreement with its commercial creditors to restructure Eurobonds totaling $13 billion by the end of 2023. Two bondholder groups have been formed, consisting of domestic and regional bondholders and international bondholders, to facilitate the negotiations.
Minister of Finance, Ken Ofori-Atta, presented the 2023 mid-year budget and assured that discussions with bondholders were underway. The government suspended debt service on external commercial obligations on December 19, 2022, and has been engaging with affected creditors to restructure its debts.
The government seeks to restructure debts totaling $14 billion, with $13 billion in bonds held by commercial creditors. Ghana aims for an external debt relief of $10.5 billion between 2023-2026 as part of the IMF program to bring the country’s debt to sustainable levels.
The Finance Minister provided updates on negotiations with bilateral creditors, and efforts were made to restructure debts totaling $5.4 billion. The Domestic Debt Exchange program was successfully completed, swapping old bonds with new ones at lower coupon rates and longer tenors, providing increased fiscal flexibility.
The debt restructuring aims to reduce debt servicing costs and restore debt sustainability, aligning with the IMF-supported Post COVID-19 Programme for Economic Growth (PC-PEG). The government continues to engage with Pension Funds, and further restructuring is planned for debt owed to Independent Power Producers, Cocoa bills, local US dollar-denominated bonds, and Bank of Ghana non-tradable debt.
Ghana’s total central government debt and guaranteed debt reached GH¢435.30 billion by the end of December 2022, representing an increase of 23.7% from the previous year. The debt-to-GDP ratio stood at 71.3% based on the revised GDP released by the Ghana Statistical Service.
Ghana’s program with the IMF involves receiving a total of $3 billion, with the first tranche of $600 million already disbursed, and subsequent tranches to be released following successful semi-annual reviews.
Opinion
The situation in Ghana regarding the restructuring of Eurobonds and debt management appears to be a critical response to the country’s economic challenges. Debt restructuring can be a complex and challenging process, but it can also be a necessary step to address the country’s debt burden and move towards debt sustainability.
Ghana’s decision to engage with its commercial creditors and seek debt relief from bilateral and international partners through the IMF program shows a commitment to finding solutions to its economic difficulties. The country’s efforts to reduce debt servicing costs and restore debt sustainability are essential for long-term economic stability and growth.
However, it’s important to note that debt restructuring is not without risks and challenges. It may require careful negotiations and trade-offs to strike a balance between addressing the country’s debt burden and ensuring that critical sectors, such as healthcare, education, and infrastructure, receive adequate funding.
The success of these debt restructuring efforts will depend on various factors, including the government’s ability to implement necessary reforms, attract investment, and manage its fiscal policies effectively. Transparency and accountability in the process are also crucial to maintaining the confidence of both domestic and international stakeholders.
Overall, Ghana’s commitment to addressing its debt challenges and implementing measures to improve the economy’s productivity and inclusivity is a positive step. It remains to be seen how these initiatives will unfold and contribute to the country’s economic growth and development in the coming years.