Ghana saves $5bn from Eurobond debt restructuring

In a significant move towards economic recovery, Ghana has successfully completed its Eurobond debt exchange, restructuring $13 billion of its external debt.

This achievement follows the completion of the Domestic Debt Exchange Programme (DDEP) and the Memorandum of Understanding (MoU) with the Official Creditors Committee (OCC).

On September 5, 2024, the government initiated the exchange offer and consent solicitation, which marks a critical step in restoring Ghana’s debt sustainability and international financial relations.

The Minister of Finance, Dr. Mohammed Amin Adam, outlined the key aspects of the exchange offer during a speech announcing the success of the initiative.

“The Eurobond exchange was designed with fairness in mind, reflecting agreements made with bondholder representatives on June 24, 2024. The process involved two main investor options: the PAR Option, which had no nominal haircut but a lower interest rate of 1.5%, and the DISCO Option, which carried a 37% nominal haircut but offered higher interest rates between 5% and 6%”, he said.

According to him, the achievement surpasses international benchmarks and demonstrates the strong support of Ghana’s bondholder community across Africa and in the international markets.

He emphasized that the high consent rate of over 98%, far exceeding the required 65%, reflects strong confidence in Ghana’s financial recovery plan.

He is of the view that the success of the exchange is a significant milestone in restructuring more than 90% of the country’s eligible external debt.

“This restructuring effort will provide critical debt relief, reducing Ghana’s overall debt by $5 billion. In addition, the exchange will result in $4.3 billion in debt service savings during the International Monetary Fund (IMF) program. The average interest rate on the bonded debt has also decreased from over 8% to less than 5%, easing the financial burden on the country”.

Dr. Adam said the agreement with bondholders has brought significant relief, including a 37 percent reduction in the nominal value of Ghana’s debt, and a reduction in average interest rates on the bonded debt.

“This swift and decisive action by the government has showcased its unwavering commitment to restoring financial stability and debt sustainability”, he said.

He explained that key to the success of the Eurobond exchange were non-financial clauses that emphasized transparency, equity, and responsible debt management.

“These include the Loss Reinstatement Clause, which protects bondholders by reinstating their nominal haircut in case of a future default, and the Information Sharing Clause, which ensures timely publication of debt figures”.

Dr. Adam clarified that Ghana’s debt exchange includes non-financial clauses that reflect government’s commitment to prudent debt management and transparency, which are becoming new market standards.

He stated that the clauses, alongside the Most Favoured Creditor Clause, will ensure that bondholders are treated equitably, further reinforcing Ghana’s credibility in international financial markets.

Looking ahead, Dr. Adam expressed optimism about Ghana’s economic trajectory following the completion of the debt exchange. He noted that the restructuring efforts are expected to reduce Ghana’s debt-to-GDP ratio significantly, bringing it down to 55% in 2028, in line with IMF targets.

“With this milestone, we can now close a significant chapter on our debt restructuring and shift focus towards sustainable economic growth and development,”Dr. Adam concluded. The government’s was able to complete this restructuring of Eurobond debt under nine months signaling its dedication to economic recovery and sets the stage for improved fiscal management and long-term growth”.