Ghana Unable to Secure Debt Agreement with Global Bondholders

Ghana’s attempts to restructure its $13 billion international bond debt have hit a snag, according to government sources on Monday, dealing a setback to its efforts to swiftly recover from default and economic challenges. Formal negotiations have been paused after the International Monetary Fund (IMF) indicated that the proposed deal did not align with its debt sustainability criteria, as stated by the government in an official announcement.

Finance Minister Mohammed Amin Adam’s office stated that discussions would resume to achieve an agreement consistent with IMF debt sustainability targets, following the release of the government’s regulatory statement. While an interim deal had been reached with bondholders, adjustments were necessary to meet IMF requirements. Talks with two groups of bondholders, including Western asset managers, hedge funds, and regional African banks, commenced on March 16 but faced resistance.

In December 2022, Ghana defaulted on a significant portion of its $30 billion external debt amid an economic downturn. Despite a modest recovery in 2023, with growth surpassing IMF forecasts, the country remains in a challenging position. The government is actively working to meet IMF demands. However, the proposed bond restructuring has caused bond prices to decline, indicating investor uncertainty.

Regional bondholders express optimism about reaching an agreement by year-end, given Ghana’s better-than-expected economic performance. The IMF’s $3 billion loan program, contingent on reforms and sustainable debt restructuring, underscores the urgency for a resolution. While the IMF supports ongoing negotiations, it has reservations about the current proposal’s alignment with program parameters. Talks are set to continue, with Ghana, Zambia, and Ethiopia navigating debt restructuring under the G20 Common Framework.