Ghana agrees debt restructuring deal with official creditors - finance
ministry
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[January 13, 2024] By
Maxwell Akalaare Adombila and Christian Akorlie
ACCRA (Reuters) -Ghana has reached a deal to restructure $5.4 billion of
loans with its official creditors, the finance ministry said on Friday,
a milestone in the country's quest for debt relief as it charts its way
out of the worst economic crisis in a generation.
The agreement with bilateral lenders including China and France was key
to unlocking new International Monetary Fund (IMF) financing and will
allow Ghana to access another $600 million under its $3 billion bailout
program.
IMF Managing Director Kristalina Georgieva welcomed the announcement in
a statement, adding the agreement "clears the path for IMF Executive
Board consideration" of the first review of Ghana's program.
The West African country, which defaulted on most of its overseas debt
in December 2022 after debt servicing costs soared, restructured most of
its local debt and also needs to reach a deal with private holders of
about $13 billion in international bonds.
"Thank you to our bilateral creditors for their support & cooperation,
that has today enabled us to reach agreement with our Official Creditors
on comprehensive debt treatment under the G20 Common Framework," the
office of Finance Minister Ken Ofori-Atta said on X.
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The ministry later published a statement saying terms were "expected to
be formalized in a memorandum of understanding" which will be dealt with
bilaterally with all creditors.
An index tracking Ghana's bonds had rallied this week, more than
recovering the early year losses, partly as the market anticipated an
agreement. Spreads in the benchmark index tightened to 2,828 basis
points from 2,964 a week ago.
The ministry said the agreement will support ongoing engagements with
bondholders and other commercial creditors.
"The Ghana agreement is in line with our expectations that we will see a
number of EM countries emerge from default in 2024," said Shamaila Khan,
head of fixed income for emerging markets and Asia Pacific at UBS Asset
Management.
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People walk past the Bank of Ghana in Accra, Ghana, November 28,
2018. REUTERS/Zohra Bensemra
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"Distressed EM sovereign hard currency debt will
continue to be a sector that outperforms this year," she added.
CUT-OFF KEY
There was no mention of the "cut-off date" - the date after which
new loans signed with bilateral creditors will not be restructured -
which emerged recently as a stumbling block to an agreement.
Two sources told Reuters earlier on Friday that Ghana's official
creditors had agreed to restructure debts that were extended to the
country up until December 2022.
The gold and cocoa producer aims to cut $10.5 billion from its
external debt repayments and interest costs that were due from 2023
to 2026 and implement an IMF reform programme.
Ghana first sent "working proposals" for the debt restructuring to
the official creditor committee in June 2023, having been locked out
of international capital markets and seeing inflation spiral in the
lead-up to its default.
Ghana is aiming to restructure $20 billion out of total external
debt that was about $30 billion at the end of 2022, according to a
government presentation to investors.
The debt is being restructured under the Common Framework, a process
set up during the COVID-19 pandemic by the Group of 20 economies.
Chad, Ethiopia and Zambia have also made debt relief requests under
the platform, which has seen slow talks due to coordination issues
and disagreements over assessing comparability of treatment between
different types of creditors.
(Reporting by Sofia Christensen, Maxwell Akalaare Adombila,
Christian Akorlie and Jorgelina do Rosario; additional reporting by
Rodrigo CamposWriting by Sofia Christensen and Rachel SavageEditing
by Chris Reese, Chizu Nomiyama, Leslie Adler and David Gregorio)
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