Ghana has reached an agreement in principle with its bondholders for restructuring $13 billion of international debt, three sources told Reuters. This development follows a deal finalised with official creditors earlier this month.
This announcement comes exactly one week before the International Monetary Fund (IMF) Board is scheduled to meet to consider the Second Review Under the Extended Credit Facility. The Board meeting’s outcome is contingent on the progress made in debt restructuring.
According to Reuters, the agreement will see bondholders take a principal haircut of up to 37% and an extension of the bonds’ maturity, two sources said.
Ghana defaulted on most of its $30 billion external debt and about $4 billion domestic debt in 2022, attributing the situation to the COVID-19 pandemic, the war in Ukraine, higher global interest rates, and surging debt. However, many economists also blame the government for excessive borrowing, with some of the funds used for recurrent rather than capital expenditure.
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Ghana opted for debt treatment under the G20 Common Framework, a process designed to facilitate quick debt overhauls and include China, the newest large bilateral lender. This followed a successful but challenging domestic debt exchange that introduced the term “haircut” into the country’s financial discussions.
“For Ghana, things are pretty close. We can expect an announcement by next week,” one source told Reuters, requesting anonymity as they were not authorized to speak to the media. The other two sources indicated that the announcement could come as soon as Friday.
Ghana began formal talks with two groups of bondholders in mid-March: one group consisting of Western asset managers and hedge funds, and another including regional African banks. The negotiations stalled in April after the proposed deal failed to meet the IMF’s debt sustainability analysis requirements, prompting both sides to regroup and find a suitable solution.
The three sources reported that the deal now fits into a revised IMF debt framework on Ghana, shared earlier with bondholders, resulting in the agreement in principle.
