Finance Minister Mohammed Amin Adam announced that the IMF will conduct the second review of Ghana’s $3 billion IMF program from April 2 to 12, 2024.
Ghana has made “significant progress” in debt-restructuring talks. The recent setback in its eurobonds will be resolved in further discussions with bondholders, according to Finance Minister Mohammed Amin Adam.
Negotiations in mid-March led to an interim agreement last week with international investors holding around 40% of Ghana’s $13 billion defaulted eurobonds. However, Adam admitted in an interview that the agreement slightly violates the IMF’s debt sustainability guidelines.
“This is not a failure but an ongoing process to arrive at an agreement consistent with debt thresholds” under the IMF’s debt sustainability analysis, or DSA, Adam said. The government will “regroup with our bondholders to continue to tweak the terms until we have final terms that work for all parties,” he said.
Ghana’s eurobonds plunged by the most since Dec. 2022, with notes due in June 2035 falling as much as 3 cents to 47.55 cents on the dollar before paring the decline.
The IMF said in a statement that the “working scenario” presented by the government of Ghana “is not in line with program parameters.”
“The IMF will continue to support the ongoing restructuring negotiations between the authorities and their external commercial creditors with the view to reach an agreement that is consistent with program parameters,” the lender said.
The recent update provided additional insight into the general framework of the eurobond restructuring. However, according to Samir Gadio, head of Africa strategy at Standard Chartered Plc, the terms of the agreement would need to be adjusted to align with IMF requirements. Gadio noted that bond prices are currently approaching levels indicative of recovery as proposed in the restructuring plan.
As part of the restructuring, international bondholders have agreed to a 33% effective nominal haircut, as outlined in one of the two options provided.
Above Target
To achieve its IMF target, Ghana’s $77 billion economy aims to reduce its debt to 55% of gross domestic product by 2028. This contrasts with the previously projected burden of 109% before Ghana initiated its restructuring efforts. However, the current agreement with bondholders would result in debt levels slightly exceeding the target.
Ghana’s economy performed better than anticipated by the IMF, growing by 2.9% in 2023, surpassing the initial IMF target of 1.5%. Consequently, Finance Minister Adam stated that a revised Debt Sustainability Analysis (DSA) would accommodate the bondholder agreement.
About a year ago, Ghana commenced efforts to restructure its debt as part of an arrangement with the International Monetary Fund. In January, Ghana reached a preliminary agreement with bilateral creditors to restructure $5.4 billion of obligations under the Group of 20 Common Framework for Debt Treatment. This agreement set the stage for restructuring eurobond debt.