Ghana, official creditors discuss cut-off date for debt restructuring - Sources

Ghana and its official creditors are negotiating cut-off dates for which new loans should be excluded from a restructuring of the country’s overseas debt, two sources familiar with the matter said.

Dates in December 2022 and March 2020 were under consideration in recent meetings of the official creditor committee co-chaired by France and China, the sources added, asking not to be named because the talks are private.

The country is restructuring its debt under the G20 Common Framework platform after tumbling into default following a series of ratings downgrades in early 2022. Borrowing and debt servicing costs rose on its bulging debt, exacerbating an economic crisis in which its currency slid and inflation soared.

While Dec. 31, 2022 is close to when Ghana defaulted, March 24, 2020 is still being considered as a cut-off date because that was when the G20 introduced its debt service suspension initiative (DSSI) to help the world’s poorest countries cope with the fallout of the COVID-19 crisis, two sources said.

However, Ghana did not apply for the initiative, used by 48 countries and backed by the International Monetary Fund and the World Bank.

“There is no concrete decision yet. Ghana and IMF prefer December 2022 because the DSA was based” on that date, one of the sources added.

A March 2020 cut-off would mean, for example, that Afreximbank’s $750 million July 2022 commercial loan is likely to be excluded.

Sources did not share the different debt relief estimates for the cut-off dates.

During meetings with bilateral creditors, Ghana has cited a “priority list of projects” that the government wants excluded from the restructuring, a source added, without providing the specific projects or their value.

The source said that removing the projects would be “consistent with the March 2020 cut-off date because most of those projects were signed after that time.”

Ghana is restructuring both domestic and external debt after an IMF $3 billion bailout secured in May.

The country is targeting $10.5 billion of external debt service relief from 2023-2026, as it negotiates the restructuring of $20 billion of its overseas debt with bilateral creditors including China, Paris Club members and overseas bondholders.