Ghana to exit default after two years with debt restructuring

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Ghana will exit a debt default after the west African nation completed a restructuring of $13bn in US dollar bonds, paving the way for a return to global capital markets almost two years after an economic crisis forced it to suspend debt repayments.

Almost all bondholders voted to exchange their bonds for new debt worth $4.7bn less, lowering Ghana’s debt bill by more than $4bn in the next two years, the government said in a statement on Thursday.

“Today, our economy has turned a corner,” President Nana Akufo-Addo, who is stepping down in the elections after two terms, said in a statement. “We’ve accomplished what everyone said was impossible — we decisively resolved Ghana’s debt overhang problem.”

Ghana is the latest country to finish a debt restructuring this year as investors and governments come to the end of a series of often protracted talks to resolve a wave of sovereign defaults that followed the Covid-19 pandemic.

Ukraine finalised a wartime restructuring of $20bn in debt in September after just four months of talks. But Zambia, which like Ghana used a G20-endorsed “common framework” for poor countries to deal with creditors, had to wait four years for lenders to finally agree terms this year.

Last month Sri Lanka reached a deal in principle for bondholders to restructure nearly $13bn of bonds just before elections, more than two years after it defaulted. Ethiopia has also launched creditor talks.

Ghana’s bond exchange finalises a deal agreed in principle in June, and means the country will be out of default before general elections in December.

Rampant inflation and the Ghanaian cedi’s collapse against the US dollar after Russia’s 2022 invasion of Ukraine led Ghana into a $3bn IMF bailout that required talks with its major creditors to reduce the debt.

As a result of the economic crisis, the gold and oil producer that was once one of the continent’s fastest-growing countries was overtaken by Ivory Coast as west Africa’s second-biggest economy after Nigeria.

The IMF has projected that Ghana’s gross public debt will fall below 80 per cent of GDP next year, down from nearly 100 per cent in 2022. Ghanaians were still battling annual inflation of more than 21 per cent as of last month. 

The legacy of the financial turmoil will be a key factor in the December elections, which will pit Akufo-Addo’s vice-president Mahamudu Bawumia against John Mahama, a former president.

Ethiopia is the next big G20 common framework case to be negotiated after Ghana. But talks to restructure a $1bn bond that fell into default last year have quickly become acrimonious.

On Thursday a bondholder committee said that an 18 per cent haircut on the bond that Ethiopia’s government floated with investors this week was “wholly inconsistent” with economic fundamentals.

The committee also criticised what it said was “the lack of transparency” over Ethiopia’s dealings with official creditors.