Analyst gives update on Ghana, Zambia-IMF board negotiations

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According to a recent analysis by investment bank Citi, Ghana and 's debt restructuring programs have taken “diverging directions” due to the latter's weaker ability to cope with large amounts of debt and greater exposure to Chinese lenders.

Citi's analysts predict that Ghana will receive approval from the () board for its $3 billion rescue loan in the coming weeks, while 's restructuring process has stalled.

Although Ghana defaulted on its external debts last December, it has since requested the restructuring of its bilateral debts via the G20's Common Framework vehicle and finalized a domestic debt swap.

Citi estimates that Ghana's international sovereign bonds would need an average coupon reduction of 30%-50% and a five-year maturity extension, with no cut in the principal value, to fill the country's projected $4.5 billion financing gap over the next three years.

Meanwhile, Zambia has been in default since November 2020, making it the first COVID-era African nation to do so. Despite pushing to complete its long-delayed Common Framework restructuring by the end of March, Citi's analysis indicates that there is little upside to bond prices in Zambia, even with a “conservative” estimate of a 25% principal haircut, 30% coupon cut, average maturity extension of six years, and a three-year grace period.

According to Citi's note, “our more positive view (on Ghana) is supported by a strong commitment by the and Paris Club to achieve a quick breakthrough.”

Citi's analysis also suggests that assuming a 12.5% exit yield, there may be an average price uptick of 10 cents on bond prices.

However, the note warns that the Zambian restructuring will require high-level compromises at both multilateral (IMF) and bilateral ( vs G7) levels.

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