Ghana is anticipating “very hard” talks with eurobond holders in the coming months as it plans to reach an agreement on restructuring its investments by a self-imposed deadline of September.
The International Monetary Fund’s first review of Ghana’s extended credit facility program is at the end of the third quarter and the country aims to report on a dollar bonds revamp deal during a meeting with the IMF, Minister of Finance Ken Ofori-Atta said in the capital, Accra, on Sunday.
“We have given eurobond holders literally all the information that is required on the debt sustainability analysis,” Ofori-Atta said. “They’ve seen what we have done on the domestic front so I’m sure that there’s going to be some very hard discussions and negotiations going forward but I’m confident that we will find a place to land that will be good for everyone.”
Ghana embarked on a debt restructuring in December to qualify for the IMF program. The government concluded the first part of a domestic debt exchange in February, with investors exchanging 87.8 billion cedis ($7.7 billion), or 67% of existing bonds for new ones, against a government target of 80%. The new securities paid as little as a 8.35% coupon, compared with an average of 19% on the old notes.
While this result and financing assurances from bilateral creditors under the Group of 20’s Common Framework were enough for the IMF Board to approve Ghana’s program last month with an initial disbursement of $600 million, further disbursements partly depend on Ghana concluding the rest of the debt reorganization.
A timely debt restructuring agreement with creditors is essential for Ghana to secure the expected benefits of its program with the IMF, Stéphane Roudet, IMF mission chief said last week at the end of a one week visit. The country’s target under the IMF program is to reduce its debt to gross domestic product ratio to 55% by 2028 from 71.2% of GDP at the end of December.
Ghana expects to reach a memorandum of understanding on specific terms of restructuring with bilateral creditors in a week’s time, Ofori-Atta said. It will launch a reorganization of cocoa bills and domestic dollar bonds soon, he said. Talks with local pension funds to revamp the 29 billion-cedi domestic bond holdings are also ongoing.
The country plans to implement reforms in the energy sector to reduce a $5.9 billion projected deficit between 2023 and 2025 by $3 billion, Ofori-Atta said.
(Updates with additional information from first paragraph.)