Ghana's debt restructuring takes another step forward

Friday May 24 2024

Ghana's President Nana Akufo-Addo looks on during the 5th Summit of "Christchurch Call", at the Elysee Presidential Palace in Paris, France on November 10, 2023. PHOTO | REUTERS


Ghana has agreed a memorandum of understanding (MoU) with its bilateral creditors, including China and France, to restructure $5.4 billion of debt, the government said on Friday, one-and-a-half years after the West African country defaulted.

The MoU paves the way for the executive board of the International Monetary Fund (IMF) to approve the disbursement of $360 million under Ghana's $3 billion, three-year bailout programme, which is expected next month.

Once signed, the agreement would form the basis of a deal to restructure loans with its official creditors under the Paris Club of creditors, agreed in January.

In a press briefing, Finance Minister Mohammed Amin Adam said Ghana is in the final stages of completing its external debt restructuring programme.

Read: Debt, pending bills batter Africa economies in 2024

The government officially received the draft Memorandum of Understanding from the Official Creditor Committee (OCC) on Thursday and would now move quickly to review the draft, with a view to signing the agreement with the OCC as soon as possible, he said.


At the end of discussions with Eurobond holders, the two sides had "very narrow" differences, he added.

He also said Ghana expected $2.32 billion in loans by year end.

Ghana was the second country in Africa after Zambia to default on most of its $30 billion external debt during the pandemic as the exporter of gold, cocoa and oil battled to emerge from its worst economic crisis in a generation.

Ghana's economy has since started to recover, with inflation easing from 54.1 percent in December 2022 to 25 percent in April 2024 and 2023 growth of 2.9 percent exceeding the IMF's 2.3 percent.

Together with Zambia and Ethiopia, the world's second-biggest cocoa producer is reworking its debt under the G20 Common Framework, a process set up during the pandemic to speed up debt overhauls.

However, progress has been slow, holding back the countries' economic recoveries and access to much needed overseas loans, aid and investment.

The IMF declared Ghana's debt unsustainable in its Debt Sustainability Analysis (DSA) and is aiming for the country to restore itself to a "moderate" risk of debt distress by 2028.

This would bring Ghana's public debt-to-GDP ratio from 88.1 percent at the end of 2022 to 55 percent by 2028.

Read: Ghana fails to reach debt deal with global bondholders

Terms with official creditors will be of interest to Ghana bondholders, who are next in line for a deal, as they will seek an equitable solution under the comparability of treatment principle, a key element of the Common Framework for debt restructuring.

Ghana did in April find common ground with some of its biggest bondholders, including Western asset managers and hedge funds as well as regional African banks. But the IMF said that the interim deal was outside the DSA threshold and needed to be tweaked.

The regional African banks had also rejected parts of the deal, including an option to retain the original value of the bonds with a longer maturity and lower coupon.

The government said it was working to satisfy the IMF's requirements.

The country concluded a domestic debt restructuring in October, during which 206 billion Ghanaian cedi ($17.5 billion) was swapped for longer-dated, lower-interest debt, resulting in 61 billion Ghanaian cedi of savings, then Finance Minister Ken Ofori-Atta said.