Ghana’s external creditors demand good faith in debt negotiation

By Francis Kyei, Senior Market Analyst, GFX-Prime

Ghana’s external creditors have urged parties involved in the country’s debt restructuring negotiations to show good faith in the negotiation process. The call comes in the wake of a recent announcement by the Government of Ghana to suspend all external debt service payments.

According to the creditors, a process of good faith negotiation would avoid unilateral actions and require a timely exchange of detailed economic and financial information among all the parties involved.

Ghana needs to bring its total debt of US$49 billion to a sustainable level as a condition to secure a $3 billion bailout from the International Monetary Fund (IMF).

The West African country has managed to secure a staff-level agreement with the IMF but needs the support of its creditors to secure a board-level agreement with the fund. Ghana hopes to secure an IMF deal by the end of the first quarter of 2023.

Following the public announcement of Ghana’s decision to restructure its external debt, the international holders of Ghana’s Eurobonds have formed a bondholder creditor committee to represent the diverse group of institutional investors including mutual funds, asset managers, insurance firms, hedge funds, and family offices. ?

Steering Members of the Committee include (acting either directly or for and on behalf of the funds or the accounts they manage) Abrdn, Amundi (UK) Limited, BlackRock, Greylock Capital Management, Ninety One.

The Committee, in a statement, says it is focused on the orderly and comprehensive resolution of Ghana’s debt challenges, recognizing that such resolution will require fair burden-sharing and collaboration among the Ghanaian authorities, private creditors (both domestic and international), and official sector creditors.

“The Committee notes that a process of good faith negotiation would avoid unilateral actions and would require, inter alia, the timely exchange of detailed economic and financial information among the committee, the Ghanaian authorities and the IMF, and would need to be anchored in reasonably feasible economic adjustment by the Ghanaian authorities,” the statement said.

“The Committee welcomes the authorities’ ongoing engagement with the International Monetary Fund (the “IMF”) and the recent announcement of the Staff Level Agreement”.

The Committee has endorsed the Institute of International Finance’s Principles for Stable Capital Flows and Fair Debt Restructuring, which provide meaningful guidance for successful sovereign debt restructurings.

The Committee expressed its readiness to ensure a swift engagement and pledged to help secure an outcome equitable to creditors and responsive to the economic and social challenges facing Ghana.

“A key factor in measuring the success of Ghana’s debt resolution would be the timely restoration of international market access, which remains critical for Ghana to meet its development objectives,” the statement said.

The Committee has appointed Orrick, Herrington & Sutcliffe LLP as legal advisor and Rothschild & Co as financial advisor.

Disclaimer: This article has been prepared by GFX-Prime, an African investment firm with its registered office on the 2nd Floor, PWC Towers, Cantonments City, Accra Ghana. This article has been issued for information purposes only. GFX-Prime does not recommend or propose that the securities referred to in this article are appropriate or suitable for your investment objectives or financial needs