Ghana has failed to secure a workable debt deal with two bondholder groups in its push to restructure $13 billion of international bonds, the government said on Monday, in a blow to its efforts to swiftly emerge from default and economic crisis. Formal talks were on hold for now after the International Monetary Fund indicated that the deal would not fit its debt sustainability parameters, the government said in a statement. “We will regroup to continue negotiations until we reach a deal that is consistent with IMF debt sustainability targets,” the office of Finance Minister Mohammed Amin Adam said on X, after the government had released its regulatory statement. He said Ghana had reached an “interim deal” with bondholders but that needed to be tweaked to meet IMF targets. Ghana had been in formal talks with two groups of bondholders since March 16 – a group of Western asset managers and hedge funds and another one including regional African banks. The regional group had also rejected part of the proposed changes, including an option to retain the original value of the bonds with a longer maturity and lower coupon. In December 2022, Ghana defaulted on most of its $30 billion external debt as it fell into economic crisis. The economy of the world’s second biggest cocoa producer has since started to recover, with 2023 growth of 2.9% exceeding the IMF’s 2.3% forecast from January.
In its official statement, Ghana’s government said it was working on satisfying the IMF’s requirements. The dollar-denominated bonds, known as eurobonds, fell between 2.6 and 3.2 cents on Monday, with most of the maturities trading between the 46 and 48 cents in the dollar mark, according to Tradeweb data. Regional bondholders believe a deal is possible before the end of the year given the Ghanaian economy is performing better than assumed in the IMF’s original analysis, Samuel Sule, Chief Executive Officer at Renaissance Capital Africa and financial advisor to the group, told Reuters. The IMF approved a $3billion, three-year loan program for Ghana in May 2023, contingent on the government implementing reforms and finishing a debt restructuring that the fund deems sustainable. The government said the IMF had assessed the proposed bondholder deal based on its first review of the loan program, which was completed in January. IMF staff has already reached an agreement on the second review, which is just pending the Fund’s executive board sign-off.
“IMF staff has determined that this working scenario is not in line with program parameters,” an IMF spokesperson said by email, adding the fund continued to support the ongoing restructuring talks. An advisor to the international bondholder committee said in a statement that restructuring discussions would continue this week. Ghana – together with Zambia and Ethiopia – is reworking its debt under the G20 Common Framework, a process set up during the COVID-19 pandemic to speed up debt overhauls. However, progress has been slow, holding back the countries’ economic recoveries and access to much needed overseas loans, aid and investment. On Saturday, IMF’s Ghana mission chief Stephane Roudet told a joint news briefing with Adam, held after a successful second review of the $3 billion loan programme, that the Fund needed to continue to see progress in talks with bondholders.
Ghana is aiming to cut $10.5 billion from its external debt repayments and interest costs due between 2023 to 2026. It reached an agreement in principle in January to rework $5.4 billion of loans with official creditors. Any deal with bondholders will have to offer comparable debt relief. The proposed bondholder deal would have included a heavily discounted option of three bonds maturing between 2030 and 2038 with coupons of 5% until 2027 and 6.5% after. Another option came with no principal reduction, but pushed bonds’ maturity out to 2043, with a 1.5% coupon. Bondholders would have additionally received a separate bond representing accrued “Past Due Interest”. This bond and the discounted options would have translated into a nominal, face value haircut of 33%. Some bondholders had favoured the use of debt instruments that could increase payouts if Ghana’s economy performs better on agreed metrics, as a way of bridging differences in their outlook. Reuters
