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Sources reveal Ghana, bondholders reach agreement for $13bn debt restructuring

Published

3 months ago

June 22, 2024

Following a deal struck with official creditors earlier this month, Ghana has secured an agreement in principle with its bondholders for the restructuring of $13 billion in foreign debt, according to three sources quoted by Reuters.

According to two of the sources, bondholders will get a haircut on the principal of up to 37% as part of the transaction, and the bonds’ term will be extended. Under the weight of the COVID-19 pandemic, the conflict in Ukraine, rising global interest rates, and soaring debt, the West African country that produced gold and cocoa went into default on the majority of its $30 billion in foreign debt in 2022.

Ghana, like Zambia, enrolled in the G20 Common Framework’s debt treatment program. This program’s objectives are to speed up debt restructurings and include China, the newest significant bilateral lender, in the process. After Zambia, the first African nation to default during the pandemic became the first copper producer in southern Africa, its bondholders approved the restructuring earlier this month.

“Things are pretty close” for Ghana. A source who wished to remain anonymous stated, “We can anticipate an announcement by next week, as they were not authorized to speak to the media.”

According to the other two sources, the news might be released as early as this Friday. Due to the late hour, it was not possible to quickly reach the Paris Club, an alliance of creditor nations, or Ghana’s finance ministry for comment.

In mid-March, Ghana initiated formal negotiations with two groups of bondholders: one comprising regional African banks and another of Western asset managers and hedge funds.

However, the proposed agreement did not satisfy the requirements of the International Monetary Fund’s (IMF) debt sustainability analysis, causing the negotiations to break down in April and forcing both parties to reorganize to come up with a workable solution.

According to the three individuals, the agreement in principle was reached because it later aligned with an updated IMF debt framework on Ghana that was previously disclosed to bondholders.

The second-largest cocoa producer in the world signed an agreement with its official creditor committee earlier this month to formalize a debt restructuring agreement that was negotiated in January.

The agreement’s broad contours made it possible for the IMF executive board to convene on June 28 in Ghana to discuss a second assessment of the country’s $3 billion loan, a three-year package, and the release of the subsequent $360 million tranche.

Related Topics:Bong holder Featured Ghana President Akufo-Addo

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Zambia eyes recovery following worst drought

Published

10 hours ago

September 28, 2024

Ifeoluwa Dada

As it emerges from its worst drought in living memory, Zambia hopes to achieve a fast recovery in economic growth and a halving of its budget deficit in the following year, the country’s finance minister announced on Friday.

In contrast to a projected 2.3% growth in 2024, the copper producer aims for 6.6% growth in 2025, according to Finance Minister, Situmbeko Musokotwane, in a budget speech.

The El Nino-caused drought destroyed Southern Africa’s crops, resulting in food shortages and harming the region’s economic prospects this year.

Zambia’s finance minister said on Friday that the nation, which is coming out of the worst drought in living memory, intends to quickly recover economic growth and cut its budget deficit in half the next year.

Finance Minister Situmbeko Musokotwane stated in a budget address that the copper producer is targeting 6.6% growth in 2025 as opposed to a projected 2.3% increase in 2024.

A UNICEF study in March 2024 states that the majority of the country’s central and southern regions have been impacted by the dry spell since mid-January. These regions have gotten less rainfall than usual, which has resulted in the destruction of one million hectares of maize—nearly half of all the corn grown in the nation.

Since hydropower generates more than 80% of Zambia’s electricity, the analysis also predicted that the drought would cause a power shortage of 430 megawatts and have an impact on surface and groundwater levels. These projections would have serious ramifications for industries other than agriculture.

The minister further stated that following the conclusion of a Eurobond restructuring exercise, Zambia was still negotiating restructuring arrangements with certain commercial creditors.

He reported that the China Development Bank and the Industrial and Commercial Bank of China have just struck provisional restructuring agreements with Zambia.

It has been demonstrated that the agreements are in line with Zambia’s IMF program and the “Comparability of Treatment principle,” which aims to prevent the wealthier creditor nations that make up the Paris Club from making disproportionate concessions in comparison to other creditors.

The lengthy debt restructuring process in Zambia has hurt local financial markets and discouraged investment.

VenturesNow

Ghana central bank cuts key rate as inflation cools

Published

23 hours ago

September 27, 2024

Ifeoluwa Dada

The governor of Ghana’s central bank has stated that the country’s economy is still recovering strongly and that inflation is continuing to decline, causing the bank to drop its main interest rate by 200 basis points to 27%. This was the first rate cut since January.

At a press conference Friday, Bank of Ghana Governor Ernest Addison stated that economic indicators point to a proceeding disinflation, with price increases continuing to moderate in the direction of the year’s short-term range target of 13% to 17%.

“Such a strong signalling of the monetary policy rate by reducing it by 200 basis points tells you that the central bank is quite satisfied with the progress of recovery of this economy,” Addison said, adding that all indicators including growth, inflation and fiscal policy are improving.

According to Reuters polled economists in July, Ghana’s interest rate is predicted to drop by 200 basis points by year’s end.

“This easing of policy is understandable, given that the recent falls in inflation had caused real interest rates to rise, something that this cut will partially reverse,” said Leslie Dwinght-Mensah, economist and research fellow at Accra-based Institute for Fiscal Studies.

“The strong rate of economic activity, which official data recently revealed, also gave the central bank the comfort to take this step.”

Economists surveyed by Reuters in July expected that by year’s end, Ghana’s interest rate will have decreased by 200 basis points.

“The strong rate of economic activity, which official data recently revealed, also gave the central bank the comfort to take this step.”

Economists surveyed by Reuters in July expected that by year’s end, Ghana’s interest rate will have decreased by 200 basis points.

“The strong rate of economic activity, which official data recently revealed, also gave the central bank the comfort to take this step.”

Following the completion of preliminary debt restructuring negotiations with two bondholder groups, Ghana extended an invitation to holders of its approximately $13 billion worth of international bonds to exchange their holdings for new instruments.

Bondholders can accept the offer until September 30.