Official Creditor Committee approves Ghana’s deal with Eurobond holders 

Ghana’s bilateral lenders through the Official Creditor Committee (OCC) have approved government’s deal with Eurobond holders on proposed terms to restructure about $13.1 billion debt.

The debt treatment with the Eurobond holders is consistent with the Comparability of Treatment principle.

The government now needs to ask all its bondholders to vote on the proposed deal, which if confirmed would finalise the debt rework.

The Ministry of Finance in a statement said it had received an official confirmation from its Official Creditor Committee (OCC) in that regard.

The debt comparability treatment formed part of the OCC Common Framework for debt restructuring, requiring that the country met comparable treatment of debt due to all its other external creditors in the scope of the restructuring.

It is aimed at ensuring a restoration of debt sustainability and preventing a disorderly default by providing significant flow of relief to Ghana during the three-year International Monetary Fund (IMF) programme implementation.

“The Government intends to continue proactive engagement with the Steering Committees to finalise documentation and proceed promptly with the consent solicitation,” the statement said.

“The government thanks its official partners as well as representatives from the two Bondholders’ Committees for their constructive engagement over the past weeks,” it stated.

GH¢225bn relief

Principal and interest either cancelled or payment deferred in the government’s debt restructuring exercise amounts to over GH¢225 billion.

This is the result of the completion of three major debt restructuring operations: domestic debt restructuring, external bilateral debt restructuring, and commercial bondholders debt restructuring.

$4.7bn (GH¢65bn) cancelled from Eurobonds

The restructuring of $13.1 billion of Eurobond debts resulted in significant savings cancellation of $4.7 billion, or GH¢65 billion involving a 37% effective nominal haircut, an increase from the initial 33% offer.

This comprises principal savings of $1.5 billion and interest savings of $2.9 billion.

$4.4bn (GH¢60bn) debt service relief on Eurobonds

Additionally, Ghana will save $4.4 billion, or GH¢60 billion, in debt service, providing further financial relief during the IMF Programme.  

$2.8bn (GH¢39bn) relief on bilateral debts

The $5.4 billion agreement signed with bilateral debt holders will provide a cash flow relief of approximately $2.8 billion, or GH¢39 billion, in debt service, postponed between 2023 and 2026 to be repaid later at a cheaper interest rate. 

GH₵61bn haircut for domestic bondholders

Overall GH₵203 billion were exchanged in the Domestic Debt Exchange Programme (DDEP) which has resulted in debt service savings of GH₵61 billion over 2023.

The domestic debt restructuring, achieved a high participation rate of almost 95%.

Domestic Coupon rates drop to 9%

Coupon rates were reduced from 21% to 9% on average, and maturities were extended, easing the near-term local debt service burden that previously consumed more than 40% of the country’s tax revenues.

The outcome of the debt restructuring aligns with the IMF programme parameters for Ghana’s three-year Extended Credit Facility (ECF) and unlocks $360 million next tranche.

Much-needed financial relief

These efforts have provided much-needed financial relief and set the stage for a renewed focus on critical infrastructure and development projects. 

It is expected that many of the country’s stalled projects would soon resume.

Implementation of the Eurobond agreement-in-principle is subject to mutual agreement on deal documentation and other stated conditions.

Factors that caused Ghana’s default

Ghana defaulted on most of its $30 billion in external debt in 2022, following the fallout from the COVID-19 pandemic, a surge in inflation, Cedi depreciation, the war in Ukraine, and higher global interest rates, which exacerbated economic strains and made the country’s debt unsustainable.

Debt payment suspended in December 2022

Consequently, the country suspended payments on its external loans in December 2022 as part of the broader debt restructuring effort under the 17th IMF loan-support programme to reach debt sustainability