Ghana has reached a deal to restructure $5.4 billion of loans with its official creditors, the finance ministry said on Friday, a milestone in the country's quest for debt relief as it charts its way out of the worst economic crisis in a generation.
The agreement with bilateral lenders including China and France was key to unlocking new International Monetary Fund (IMF) financing and will allow Ghana to access another $600 million under its $3 billion bailout program.
IMF Managing Director Kristalina Georgieva welcomed the announcement in a statement, adding the agreement "clears the path for IMF Executive Board consideration" of the first review of Ghana's program.
The West African country, which defaulted on most of its overseas debt in December 2022 after debt servicing costs soared, restructured most of its local debt and also needs to reach a deal with private holders of about $13 billion in international bonds.
"Thank you to our bilateral creditors for their support & cooperation, that has today enabled us to reach agreement with our Official Creditors on comprehensive debt treatment under the G20 Common Framework," the office of Finance Minister Ken Ofori-Atta said on X.
The ministry later published a statement saying terms were "expected to be formalized in a memorandum of understanding" which will be dealt with bilaterally with all creditors.
An index tracking Ghana's bonds had rallied this week, more than recovering the early year losses, partly as the market anticipated an agreement. Spreads in the benchmark index (.JPMEGDGHAR) tightened to 2,828 basis points from 2,964 a week ago.
The ministry said the agreement will support ongoing engagements with bondholders and other commercial creditors.
"The Ghana agreement is in line with our expectations that we will see a number of EM countries emerge from default in 2024," said Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS Asset Management.
"Distressed EM sovereign hard currency debt will continue to be a sector that outperforms this year," she added.
CUT-OFF KEY
There was no mention of the "cut-off date" - the date after which new loans signed with bilateral creditors will not be restructured - which emerged recently as a stumbling block to an agreement.
The gold and cocoa producer aims to cut $10.5 billion from its external debt repayments and interest costs that were due from 2023 to 2026 and implement an IMF reform programme.
Ghana first sent "working proposals" for the debt restructuring to the official creditor committee in June 2023, having been locked out of international capital markets and seeing inflation spiral in the lead-up to its default.
Ghana is aiming to restructure $20 billion out of total external debt that was about $30 billion at the end of 2022, according to a government presentation to investors.
The debt is being restructured under the Common Framework, a process set up during the COVID-19 pandemic by the Group of 20 economies.
Chad, Ethiopia and Zambia have also made debt relief requests under the platform, which has seen slow talks due to coordination issues and disagreements over assessing comparability of treatment between different types of creditors.
