Ghana will default with most of the foreign debt as the economic crisis deepens

  • Ghana suspends payments on Eurobonds and commercial loans
  • Announcement one week after IMF staff agreement
  • Eurobonds down as much as 3 cents in dollars

ACCRA, December 19 (Reuters) – Ghana suspended payments on most of its external debt on Monday and has become virtually insolvent as the country struggles to rebalance its cavernous external deficit.

The Treasury said it would not service any debt, including its eurobonds, trade credits and most bilateral loans, calling the decision an “interim emergency measure,” while some bondholders criticized a lack of clarity in the decision.

The government “stands ready to start talks with all of its external creditors to make Ghana’s debt sustainable,” the finance ministry said.

The suspension of debt payments reflects the poor state of the economy, which prompted the government to strike a $3 billion staff-level deal with the International Monetary Fund (IMF) last week.

Ghana had already announced a domestic debt swap program and said it was negotiating with creditors for an external restructuring. The IMF said a major debt restructuring was a condition of its support.

The country has been struggling to refinance its debt since the beginning of the year after downgrades from several rating agencies amid concerns it might not be able to issue new Eurobonds.

This has sent Ghana’s debt further into the distressed territory. The national debt stood at 467.4 billion Ghanaian cedis ($55 billion according to Refinitiv Eikon data) in September, of which 42% was domestic.

Ghana’s External Debt by Holder Type, 2022 Q3, USD bn

The balance of payments deficit was more than $3.4 billion in September, compared to a surplus of $1.6 billion at the same time last year.

While 70% to 100% of government revenue currently goes to service debt, the country’s inflation spiked as high as 50% in November.

Ghana has experienced what some say is the worst economic crisis in a generation. Last month, more than 1,000 protesters marched through the capital, Accra, calling for the president’s resignation and denouncing deals with the IMF as fuel and food costs soared.

Its gross international reserves were about $6.6 billion at the end of September, equivalent to less than three months of import coverage. That’s down from about $9.7 billion at the end of last year.

The government said the suspension will not include payments on multilateral debt, new debt borrowed after December 19, or debt related to certain short-term trade facilities.


International bondholders of Ghana confirmed in an emailed statement late Monday the formal establishment of a creditors’ committee aimed at facilitating the “orderly and comprehensive resolution” of the country’s debt challenges.

Any good faith negotiations, the creditors’ committee said, must avoid unilateral action and require the timely sharing of detailed economic and financial information between international bondholders, the government and the IMF.

The steering committee consisted of Abrdn, Amundi, BlackRock, Greylock and Ninety One, the group said in its statement.

Kathryn Exum, co-head of Gramercy’s Sovereign Research practice, was hopeful about the debt restructuring, noting that it should prove easier for creditors than other recent emerging market restructurings.

“It’s easier than Sri Lanka and Zambia, given that there isn’t a lot of Chinese debt,” Exum said Friday in comments anticipating the external restructuring.

A bondholder, who asked not to be identified, said the lack of detail in the announcement could be a concern for investors.

Ghana’s foreign bonds, which are trading at a very distressed level of 29-41 cents per dollar, fell with the 2034 bond falling more than 3 cents, Tradeweb data showed.

Reuters Graphics Reuters Graphics

Still, some investors said the suspension of foreign debt payments was expected.

“It’s consistent with Ghana holding restructuring talks with various debt holders, so it’s not coming out of the blue,” said Rob Drijkoningen, co-head of emerging market debt at Neuberger Berman, which holds some Ghanaian eurobonds.

According to a person familiar with the matter, Ghana paid a coupon due Dec. 16 on a 2049 euro bond.

It wasn’t immediately clear if the debt service suspension would include a $1 billion 2030 bond backed by a $400 million World Bank guarantee.

“We will not comment on the specifics of any particular bond or debt at this time, but… we are fully involved with all stakeholders,” a Treasury Department spokesman told Reuters.

($1 = 8.5000 Ghanaian Cedi)

Reporting by Christian Akorlie and Cooper Inveen; Additional reporting by Rachel Savage, Marc Jones and Jorgelina do Rosario; writing by Rachel Savage and Cooper Inveen; Edited by Karin Strohecker, Ed Osmond, Arun Koyyur and Aurora Ellis

Our standards: The Thomson Reuters Trust Principles.

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