Ghana’s Sovereign Debt - New twists and turns.

Ghana needs an urgent resolution to its external debt crisis to unlock the $ 3 billion IMF bailout for the country, but this comes at a price, first the implementation of severe austerity measures and second an agreement with its international creditors, neither of which are easy options, hence recent twists and turns.

The twists and turns

• As of September 2022, Ghana’s public debt stood at over 467 billion cedis ($46.7 billion) of which 42% is domestic debt and 13% that held by local commercial banks.
• The country’s public debt to GDP rate is fast approaching 100%.
• Approximately $13 billion of Ghana’s external debt is held in Eurobonds by leading asset management firms like BlackRock, PIMCO, Neuberger Berman and Abdrn, with 10% of the external debt owned by China.
• At the end of 2022, the Ghanaian government suspended payments to service its debts Eurobonds, commercial loans and most bilateral loans citing economic challenges.
• The Ghanaian government delegation and IMF representatives have reached a staff-level agreement on economic policies and reforms for a new three-year arrangement under the US$3 billion Extended Credit Facility (ECF).

Key takeaways: Recently, the Ghanaian government and international bondholders made progress by holding formal debt talks after representatives of both sides signed non-disclosure agreements. Without an agreement on the debt restructuring accessing the IMF bailout will be delayed. More urgently, the right reform is needed to restore and ensure economic growth and debt sustainability.