Ghana defers bilateral debt payments to 2028

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Ghana has postponed the repayment of its debt to Official Bilateral Creditors until 2028, as part of ongoing efforts to manage the country’s debt burden.

The announcement was made by Finance Minister Dr. Mohammed Amin Adam during a press briefing in Accra on Thursday, October 3, 2024. This comes after the country completed its $13 billion external debt exchange, which includes Eurobonds.

In his statement, Dr. Adam confirmed that Ghana would resume payments to Eurobond holders in the next two weeks, but at reduced levels due to lower interest rates and principal reductions under the new terms of the debt exchange.

“By the 98 per cent we’ve achieved, we’ve all consented to the exchange, but the actual exchange will take place over the next two weeks, and once we exchange, it means that we can start servicing our debts,” Dr. Adam said.

He added that while Eurobond payments would resume shortly, “the servicing of the debt owed to Official Bilateral Creditors has been postponed until after 2028.”

The Finance Minister explained that the government is taking steps to build buffers for future debt repayments. This includes increasing the revenue-to-GDP ratio to 18 percent and growing the country’s Sinking Fund, which is designed to manage debt repayment over time.

“With increased revenue, our capacity to pay back our debts is going to be enhanced,” Dr. Adam said. He noted that amendments to the Fiscal Responsibility Act were being prepared for Parliament, which would help limit new debt accumulation.

The completion of the Domestic Debt Exchange Program (DDEP) and the external debt restructuring, including the Eurobond exchange, is expected to bring relief to Ghana’s economy. Dr. Adam emphasised that the restructuring efforts would strengthen the cedi against major currencies like the dollar and improve the country’s credit rating.

“With this development, Ghana is likely to get positive upgrades, and when you get upgrades, the international community and investor confidence in your economy increases,” he stated. The Finance Minister also highlighted that increased foreign investment could strengthen the cedi by boosting the inflow of foreign exchange.

Ghana’s external debt restructuring has been a crucial part of its strategy to stabilise its economy following the suspension of debt payments in December 2022. At the time, the government halted payments on Eurobonds, commercial term loans, and bilateral debts to prevent further economic deterioration.

As part of its restructuring process, Ghana sought assistance from the International Monetary Fund (IMF) under a $3 billion Extended Credit Facility. The program, approved in May 2023, aims to restore macroeconomic stability and ensure long-term debt sustainability.

By deferring bilateral debt payments and focusing on revenue growth, the government aims to maintain fiscal stability while balancing the pressures of debt servicing and economic recovery.