Ghana has agreed in principle with its bondholders to restructure its $13 billion Eurobonds. According to sources who spoke with Reuters, bondholders will face up to a 37% reduction in the principal and an extension of the bonds’ maturity.
This agreement follows Ghana’s recently finalized deal with the official creditor committee, formalizing a debt restructuring deal initially agreed upon in January 2024. These restructuring agreements are paving the way for the country to receive a new funding tranche from the International Monetary Fund (IMF).
The agreement’s details set the stage for the IMF executive board’s approval of a second review of Ghana’s $3 billion loan package, facilitating the release of the next $360 million tranche.
Ghana’s Debt Restructuring Efforts
In 2022, Ghana faced an economic crisis due to mounting debts and declining revenue. The country began the process of obtaining a credit facility from the IMF. As part of the $3 billion credit facility agreement, Ghana had to enter into a debt restructuring agreement. This started with its local currency bondholders, leading to a domestic debt exchange program.
The domestic debt exchange program carried out in December 2022, resulted in significant reductions for domestic bondholders. This restructuring also affected Nigerian banks, which incurred about N284 billion in losses due to the restructuring of Ghanaian bonds. The first step taken by the Ghanaian government in restructuring its debt helped it receive the first tranche of $600 million from the IMF’s $3 billion credit facility.
Discussions for the second tranche have been ongoing since January 2024. This culminated in an agreement with the Official Creditor Committee (OCC) to restructure its $5.4 billion loan. The OCC represents the country’s bilateral lenders and is chaired by China and France. In June 2024, the Ghanaian government finalized a deal with the OCC, moving closer to receiving the IMF’s executive board approval for the second tranche of $360 million. The deal with the OCC was reached under the G20 Common Framework for Debt Treatment.
After restructuring its local debts and bilateral loans, the next set of loans to be restructured are the foreign-denominated commercial debts (Eurobonds). According to Reuters, Ghana targets debt relief of up to $10.5 billion between 2023 and 2026. This relief is essential to reduce its public debt-to-GDP ratio from 88.1% at the end of 2022 to 55% by 2028, one of the terms for the IMF credit facility.
Impact on Nigerian Holders of Ghana’s Eurobonds
In December 2023, Ghana’s Finance Minister announced no reductions on the principles for domestic bondholders. However, it is estimated that bondholders incurred losses of about 106.64 billion Ghana Cedis (~$7 billion). Nigerian banks significantly participated in these losses, recording almost $1 billion due to the restructuring. It is still unknown how much these Nigerian banks hold in Ghanaian Eurobonds. However, with a proposed 37% reduction on the principal, there’s a higher probability of increased losses due to the devaluation of the Naira from January 2023 to date.
