Ghana’s economic crisis lingers as it fails to strike debt deal with two international Bondholders

On Monday, The Ghanaian government said that it failed to strike a deal with two international bondholder groups in its bid to restructure $13 billion of international bonds and pull the west African country out of its largest economic crisis in a generation.

According to Reuters, talks were derailed for now after the International Monetary Fund (IMF) indicated that the deal would not fit into its debt sustainability parameters which usually suggest how much debt the IMF thinks a country can afford.

Since March 16, Ghana has been in formal talks with two international bondholder groups which include one “international” group of western asset managers and hedge funds and another one including regional African banks.

The Ghanaian government explained that it was working hard to arrive at a solution that would benefit the country and its international bondholders while fitting into IMF policies and parameters.

The Government is actively working on solutions that it believes would be consistent with IMF program parameters under the set of policies currently being discussed, with the objective of reaching a mutual agreement acceptable to all parties,” the government said in the regulatory statement.

Ghana together with other African countries like Zambia and Ethiopia are struggling to rework their debt under the G20 Common Framework, a process set up during the COVID-19 pandemic to speed up debt overhauls.

However, the progress of the three African countries in its debt reworking pursuit has been slow.

Ghana is “confident… at some point” it will reach an agreement with bondholders,” Finance Minister Mohammed Amin Adam told a press conference on Saturday, without giving a timeline.

The IMF’s Ghana Mission Chief Stephane Roudet at a joint news briefing held at the end of the IMF’s second review of its $3 billion loan program with Ghana explained that the Fund needs to see continuous progress in Ghana’s talk with its bondholders.

Bondholders in the proposed new deal that fell through have pushed for the addition of extra clauses to the new deal. These extra clauses include a “loss reinstatement clause” that reverts the new bonds back to their original values in case of another default and provisions to limit the right of the government to legally challenge the deal.

Ghana is aiming to cut $10.5 billion from its external debt repayments and interest costs due from 2023 to 2026. It reached an agreement in principle in January to rework $5.4 billion of loans with official creditors, which will need to confirm that the bondholder deal is comparable to what they offered.

What To Know

In December 2022, Ghana, the world’s second-biggest cocoa producer, defaulted on most of its external debt of $30 billion, after debt costs and inflation surged when it was locked out of international markets.

The West African country is currently going through its worst economic crisis in a generation and it is seeking to restructure about $13 billion worth of international bonds.

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