The Ghanaian government recently announced that it was going to default on its external debt in December and has not made payments on its international bond since. This forthcoming sovereign default is going to weaken the Ghanaian economy and local and international bondholders are not too pleased with this situation. Some Ghanaian investors of the 2030 Eurobond have received coupon payments, which had been due on April 14. The bond maturing in 2030 with a coupon of 10.75% is partially guaranteed by the World Bank, so payment kicked in this week via the bank’s International Development Association. The World Bank confirmed that the IDA made the guaranteed payment of close to $50 million on April 20.
Ghana External Debt Stocks, 2010-2021
Source: World Bank
The $400 million guarantee by the multilateral lender on the $1 billion issue back in 2015 was designed to provide extra security under “challenging market conditions” in case the West African country failed to pay. Ghana’s debt talks have taken a significant step forward as the government engaged one of the world’s largest financial advisory firms in formal negotiations. Bermuda-based Lazard is representing Ghana, while Paris-based Rothschild is representing international bondholders, who account for the largest share of the country’s external debt. The talks cover the $13 billion owed to international bondholders and are being held under a non-disclosure agreement, meaning that no public information will be released at this time.
The negotiations with international bondholders are only a part of Ghana’s debt restructuring talks, which are proving to be challenging due to the diversity of the country’s creditors. Ghana secured a staff-level agreement with the International Monetary Fund for a $3 billion support package in December, but it is still awaiting IMF executive approval for disbursements to begin. Domestic debt, which accounts for a third of the country’s total debt ($19 billion), was dealt with through a successful Domestic Debt Exchange Programme initiated by the Ministry of Finance at the start of the year. The government managed to swap $8.2 billion of domestic bonds, despite the exemption of pension funds after labor unions threatened a general strike. The remaining external debt, which amounts to approximately $36 billion, is where the situation becomes more complicated. This situation involves private lenders (international bondholders and commercial banks), bilateral lenders (China and Paris), and multi-lateral lenders (World Bank & IMF). Despite the recent coupon payment, finance minister Ken Ofori-Atta said during a presentation to investors on April 14 that the 2030 bond will be part of the debt restructuring with private bondholders.