On Monday, Ghana announced the setback in its negotiations with two groups of bondholders to restructure $13 billion of international bonds, dealing a blow to its aspirations of swiftly emerging from default and economic crisis. Talks were suspended as indications from the International Monetary Fund (IMF) suggested that the proposed deal would not align with its debt sustainability parameters.
Since March 16, Ghana had engaged in formal discussions with two distinct groups holding its international bonds: one comprised of Western asset managers and hedge funds, and the other included regional African banks. However, negotiations hit a standstill, particularly with the regional African bondholder group rejecting certain elements of the proposed restructuring, including the “PAR option.”
Ghana defaulted on most of its external debt totalling $30 billion in December 2022, precipitated by surging debt costs and inflation after being shut out of international markets. Despite actively pursuing solutions consistent with IMF program parameters, as outlined in a government statement, reaching a mutual agreement acceptable to all parties remains elusive.
Alongside Zambia and Ethiopia, Ghana is undergoing debt restructuring under the G20 Common Framework, although progress has been sluggish. While Zambia recently secured a restructuring deal with official creditors, Ghana's progress has been stymied by disagreements with bondholders.
Finance Minister Mohammed Amin Adam expressed confidence in reaching an agreement with bondholders, albeit without specifying a timeline. However, the IMF emphasized the need for continued progress in negotiations, underscoring the significance of resolving debt issues for Ghana's economic recovery.
Ghana aims to slash $10.5 billion from its external debt repayments and interest costs from 2023 to 2026. Although an agreement in principle was reached in January to restructure $5.4 billion of loans with official creditors, confirmation from these creditors hinges on the resolution with bondholders.
The proposed bondholder deal included discounted options maturing between 2030 and 2038, along with a “PAR option” and accrued “Past Due Interest” bonds. Despite efforts to bridge differences, including the introduction of state-contingent debt instruments, negotiations faced challenges, with bondholders pushing for additional conditions.