Ghana has reached an agreement-in-principle with its Eurobond holders to restructure approximately US$13 billion in debt, a significant step towards economic stabilization and recovery.
The Committee of Ghana’s Eurobond holders announced this development on Monday, June 24. The implementation of the agreement-in-principle is contingent on mutual agreement on deal documentation and other specified conditions.
The proposed restructuring aims to address Ghana’s Eurobond default, providing substantial relief in cash flow and reducing debt stock. This move is part of Ghana’s broader efforts to support economic recovery under the International Monetary Fund (IMF)-financed program. The restructuring plan includes extending debt maturities, reducing interest rates, and potentially writing off part of the principal debt, thereby creating fiscal space for investments in critical sectors.
The Committee has encouraged all Eurobond holders to carefully consider the terms of the government’s prospective offer, independently appraising the merits and risks of participation. The Committee noted that this agreement is crucial for Ghana’s economic stability and long-term growth prospects.
In addition, the Committee welcomed the government’s commitment to reinstating and implementing an amended Fiscal Responsibility Act, which aims to ensure macroeconomic stability and debt sustainability. The Act mandates that the overall fiscal balance on a cash basis does not exceed a deficit of five percent of Gross Domestic Product (GDP) annually. This measure is expected to enhance fiscal discipline and promote sustainable economic policies.
However, the Committee emphasized the importance of sustaining economic policy implementation to bolster macroeconomic stability, improve the investment environment, and institutionalize fiscal credibility. Continuous policy efforts are necessary to maintain investor confidence and support economic growth.
The agreement also includes several non-financial provisions aimed at increasing transparency and accountability. These provisions include semi-annual public debt disclosures, a most-favored-creditor clause, and a loss reinstatement clause. These measures are designed to normalize relations with bondholder investors and restore Ghana’s access to international financial markets.
In December 2022, Ghana suspended payments on its external loans as part of a comprehensive debt restructuring effort under the 17th IMF loan-support program. This suspension was an interim emergency measure pending future agreements with all relevant creditors. It was necessitated by multiple factors, including the adverse impact of the COVID-19 pandemic, a surge in inflation, depreciation of the Cedi, and significant stress on the government budget, which rendered the country’s debt unsustainable.
The Ministry of Finance explained that the suspension aimed to provide temporary relief and create an opportunity for the government to negotiate more sustainable terms with its creditors. The debt restructuring agreement with Eurobond holders marks a critical milestone in Ghana’s efforts to restore economic stability and achieve long-term debt sustainability.