Ghana has reached a significant agreement that will reduce nearly 40 percent of the value of its $13 billion in international bonds, signaling a potential end to almost two years of default on its debt.
This development is a pivotal move for the West African nation, which has faced economic challenges exacerbated by external debts of nearly $30 billion.
The deal involves major bondholders including Abrdn, Neuberger Berman, Greylock Capital Management, and Amundi, who have collectively agreed to forfeit $4.7 billion of their original claims. This arrangement was jointly announced by Ghana’s government and a committee representing the foreign creditors on Monday.
This restructuring is part of a broader effort endorsed by the G20 under its “common framework” for sovereign debt restructuring, which has faced numerous delays.
The process mirrors Zambia’s recent restructuring under the same framework, which was approved last month nearly four years after Zambia defaulted.
Ghana’s government highlighted that the deal includes substantial concessions from bondholders, providing the necessary debt relief to meet targets set by the International Monetary Fund (IMF).
The new terms will see most of the bonds lose 37 percent of their face value as they are converted into debts with longer maturities and a reduced interest rate of 5 percent over the next four years. Additionally, up to $1.6 billion of the new bonds will not face a reduction in face value but will carry a lower interest rate of 1.5 percent.
The international bondholder committee holds about 40 percent of the debt, while a regional bondholder committee owns another 15 percent. This agreement is expected to be finalized within weeks, setting Ghana on a path to exit default before the December elections, in which President Nana Akufo-Addo will step down.
The economic crisis in Ghana, marked by double-digit inflation and disruptions in key exports like gold, cocoa, and oil, led to the country falling behind on debt payments at the end of 2022.
The situation prompted a $3 billion bailout from the IMF, contingent on debt relief negotiations conducted through the G20’s common framework.
Despite its intentions, the common framework has struggled to streamline sovereign debt restructuring, particularly in nations with diverse creditor bases, complicating coordination efforts. Ghana’s negotiations faced additional challenges in April when the IMF determined that the initial deal would not meet debt targets.
To address these complexities, the Ghana deal includes a “most favoured creditor” clause, preventing the government from offering better terms to other lenders than those given to bondholders. Additionally, Ghana is required to publish certain public debt information semi-annually and is protected from legal challenges to the bonds.
The international bondholder committee emphasized that these clauses are essential for normalizing relations with investors and progressing towards restoring Ghana’s access to international markets.