The government is expected to come to terms with its commercial lenders to restructure EUR 13 billion worth of Eurobonds by year-end.
As a result, there are now two types of bondholders: local and regional bondholders on the one side, and global bondholders on the other.
Experts have been speculating for months about how quickly the government would be able to restructure its debt with its external creditors, but the most recent news is anticipated to put a stop to their suspicions.
Ken Ofori-Atta, minister of finance, presented the midyear budget for 2023. He stated that the government had already shared a set of data and scenarios to start discussions and anticipated receiving counteroffers from the bondholders in the near future as it planned to reach an agreement by year's end.
On December 19, 2022, the government declared that it will stop paying interest on its external commercial obligations. Since then, it has been working with the impacted creditors to restructure the debt.
A total of $14 billion in debt, including $13 billion in bonds with its commercial creditors, is being sought after by the government for restructuring.
Through its engagement with these external creditors, which include both bilateral and commercial creditors, the nation aims to reduce its external debt by US$10.5 billion between 2023 and 2026.
The IMF program, which aims to reduce the country's debt to levels that are manageable, depends heavily on this aspect of the debt restructuring activities.
By 2028, the nation is supposed to lower its debt to GDP ratio to 55% as part of the IMF program.
Bilateral creditors
Speaking about the status of the talks with the bilateral creditors, Mr. Ofori Atta stated that despite the creation of the Creditor Committee, which is co-chaired by China and France, the government was still in contact with the creditors to restructure their US$5.4 billion worth of debt.
In addition to the Debt Service Suspension Initiative, he claimed that the government had engaged in a number of conversations with its bilateral creditors through the Paris Club to offer financing guarantees to support the IMF program. The government had also requested treatment of the bilateral debt under the G20 Common Framework.
Domestic debt restructuring
The Domestic Debt Exchange scheme, which attempted to replace old bonds with new ones at lower coupon rates and longer tenors, was introduced by the government in December 2022.
The government successfully finished the DDEP in February after three months of negotiations with the various bondholder groups and modifications to the original provisions.
Total bonds outstanding at the settlement date amounted to GH¢126.97 billion, out of which GH¢29.28 billion were held by Pension Funds, bringing the total eligible bonds to GH¢97.74 billion.
At the end of the DDEP, the Ministry of Finance received final participation of GH¢82.99 billion, representing 84.9 per cent of total eligible bonds.
Mr Ofori Atta said the DDEP had provided government with increased fiscal flexibility and addressed cash and other liquidity constraints.
“The restructuring is critical to the implementation of the IMF supported Post COVID-19 Programme for Economic Growth (PC-PEG). To ensure a return to the path of debt sustainability, a comprehensive debt strategy centred on a restructuring programme was pursued,” he stated.
He said the main aim of the operations was to reduce debt servicing costs and restore debt sustainability.
The government stated in April 2023 that it intended to continue pursuing the restructuring of its debt due to independent power producers (IPPs), cocoa bills, local US dollar denominated bonds, and Bank of Ghana non-tradable debt in order to finish the domestic debt operations.
The IPPs, numbering six, recently kicked against any plans from the government to restructure its US$1.4 billion debt.
The government recently launched debt operations to local US dollar bonds of about US$809 million and cocoa bills totalling GH¢7.93 billion.
The settlement date was yesterday (July 31) and Mr Ofori Atta said the government was looking forward to a successful operation.
Although Pension Funds were exempted from the main DDEP, he said the ministry continued to engage them.
Public debt
The Finance Minister provided an update on the nation's total debt, stating that as of the end of December 2022, the nominal amount of Ghana's central government debt and guaranteed debt was tentatively GH435.30 billion, up from GH351.78 billion in 2021.
This represents an increase of 23.7 per cent.
He claimed that, according to the Ghana Statistical Service's updated estimate of GDP released in April 2023, the debt-to-GDP ratio as of the end of December 2022 was 71.3%.
The provisional sum for the overall debt stock, according to him, is GH240.91 billion, which is equivalent to 39.5% of GDP, and GH194.38 billion, which is comparable to 31.8% of GDP for both domestic and external debt, respectively.
Ghana's program with the IMF will see the nation receive a total of $3 billion, of which the first tranche of US$600 million has already been distributed. The second tranche of US$600 million is anticipated in November, when Ghana has finished the first part of the program.
the remaining funds, which will be distributed in five installments totaling US$360 million each upon the satisfactory completion of each of the semi-annual evaluations.
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