New round of debt restructuring: Govt turns to private banks, contractors

The government has sent an offer to private banks and contractors who it owes about $2.8 billion for a possible restructuring of the debt.

After successfully negotiating a deal with its bilateral and Eurobond holders, the government has now turned its attention to private banks and suppliers.

The negotiations with these creditors who form part of the country’s commercial creditors are aimed at providing some debt relief to the country.

Responding to a question from the Graphic Business at its monthly economic update, Minister of Finance Dr Mohammed Amin Adam said the government has sent an offer through its advisors.

He said the government has also engaged physically with these creditors in Ghana and China.

“We visited China and we engaged some of them. We have also engaged some here in Ghana and we have shared our offer with them for their consideration.”

“Hopefully, they will accept the terms that we are offering to them,” he stated.

Eurobond holders

This comes weeks after the government’s deal with Eurobond holders to restructure a $13 billion debt

The deal with holders is expected to lead to a debt cancellation of $4.7 billion and debt service relief of $4.4 billion between 2023 and 2026.

It also comes months after the government formalised its agreement with bilateral creditors to restructure its $5.1 billion debt. This deal is also expected to result in a debt service relief of $2.8 billion between 2023 to 2026.

The government has also concluded negotiations with five of the seven Independent Power Producers, which will lead to a saving of some $6.6 billion over the lifetime of the Purchasing Power Agreements (PPAs).

Dr Amin Adam said the government would in the coming days launch the exchange offer for its Eurobonds.

He said the exchange offer, which would be opened for 21 days, reflected the terms agreed in principle with bondholders on 24th June including important concessions from bondholders, ensuring a fair burden sharing between domestic, official and commercial external creditors.

“We count on the full support of our bondholder community, both abroad and in Ghana, to reach high participation levels.”

“We expect that all of our outstanding bonds will be exchanged for our new bonds where investors can choose between two options: a PAR option – with no nominal haircut but low interest rates, and a Disco option with a 37% nominal haircut but higher interest rates,” he stated.

Strategic infrastructure

The minister said the government had taken steps to ensure the completion of strategic infrastructure that have been impacted by the debt operations.

“Our efforts have enabled us to complete the Prempeh (I) International Airport, Afari Military Hospital in Kumasi as well as the Yakubu Tali International Airport in Tamale.”

“This week, the President cut sod for the Accra-Tema Motorway redevelopment project. Two (2) days ago, I also visited the Kasoa-Winneba Road, which is being fully funded from the national budget,” he mentioned.

He said the government was also working with its partners to implement the Economic Roads Improvement Programme, which includes the Accra-Kumasi Road.

He said that was part of a broader strategy to open up the country for trade, tourism and regional integration.

Third review

The minister also announced that the government was currently preparing for the third review of the IMF-supported Programme after successfully concluding the second review of the programme on June 28, 2024.

For the third review, the IMF has programmed a staff mission for the period September 24 to October 4, 2024 to, among others, assess the performance of the country in relation to the performance targets agreed with the fund under the programme.

The review will assess the six Quantitative Performance Criteria (QPCs), four Indicative Targets (ITs), and a number of
Structural Benchmarks (SBs) due by end June 2024.

Dr Amin Adam said preliminary data for the first half of 2024 indicated that the counter was on track to meeting the targets for the 3rd Review.

It is expected that the IMF Executive Board will consider Ghana’s 3rd Review for approval by end December 2024, which will enable the Board to immediately disburse the 4th Tranche of US$360 million, bringing the total disbursements to US$1.92 billion.

World Bank support

Government is currently in a US$900 million Development Policy Operation (DPO) Programme with the World Bank for a period 3 years to support the budget and the implementation of key reforms aimed at restoring fiscal and debt sustainability, supporting financial sector stability and private sector development, improving energy sector operational and financial performance, and fostering resilience to shocks and climate change.

Dr Amin Adam said following the achievement of the first set of reform actions, the first tranche of financing under the DPO amounting to US$300 million was disbursed by the World Bank in March 2024 to support the budget.

“Government is currently implementing the second set of reform actions that will result in the disbursement of the second tranche of the funding under the DPO series.”

“Significant progress has been made by all implementing MDAs towards the achievement of the reform actions. Five out of the 10 actions under DPO2 have been achieved, with the remaining at various advanced stages of completion,” he said.

He said there were, however, four legislations pending Parliamentary approval that were critical to the approval and disbursement of the second tranche of the DPO series.

These are the Social Protection Bill, the Environmental Protection Authority Bill, the Amendment to GIPC Act (Act, 865, 2013), and the LI on Independent power purchase.

“We are working with Parliament with the expectation that all these outstanding legislations will be passed by the House during the recall to help fast-track the achievement of all actions necessary for the disbursement of the next tranche of US$300 million,” he said.