Ghana to default on most external debt as economic crisis worsens

  • Ghana defaults on Eurobonds, commercial loans
  • Statement one week after IMF staff agreement
  • Eurobonds are down as much as 3 cents on the dollar

ACCRA, Dec 19 (Reuters) – (This Dec. 19 report has been corrected to correct the debt figures in the original chart)

Ghana on Monday suspended payments on most of its external debt, severely damaging the country’s efforts to shore up its debt payments.

His finance ministry said it would not pay the debt, including its Eurobonds, commercial loans and several secondary loans, calling the decision a “temporary emergency”, while some shareholders criticized the lack of clarity in the decision. the body.

The government “is ready to engage in dialogue with all external creditors to make Ghana’s debt sustainable”, the finance ministry said.

The suspension of debt payments reflects the critical economic situation, which led the government last week to obtain a $3 billion staff level agreement with the International Monetary Fund (IMF).

Ghana has already announced a debt reform program and said external restructuring is being negotiated with creditors. The IMF has said that full debt restructuring is a condition of its support.

The country has been struggling to repay its debt since the beginning of the year after the decline of many credit institutions over concerns that it will not be able to issue new Eurobonds.

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That has sent Ghana’s debt into the crisis zone. Its public debt stood at 467.4 billion Ghana cedis ($55 billion according to Refinitiv Eikon data) in September, of which 42% was domestic.

Reuters graphic

It had a balance of payments deficit of more than $3.4 billion in September, down from a $1.6 billion deficit in the same period last year.

Although 70% to 100% of the government’s revenue now goes to pay the debt, the country’s inflation increased by 50% in November.

Ghana has been experiencing what some say is its worst economic crisis in generations. Last month, more than 1,000 protesters marched in the capital Accra, calling for the resignation of the president and criticizing their agreement with the IMF as fuel and food waste.

Gross international reserves were about $6.6 billion at the end of September, coming down to less than three months of import cover. That was down to around $9.7 billion at the end of last year.

The government said the suspension will not include payments for multi-party debt, new debt issued after December 19 or debt related to certain short-term business entities.

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‘DON’T COME OUT OF THE BLUE’

Ghana’s international bondholders confirmed in an emailed statement late Monday that the initiation of the bankruptcy committee is to facilitate an “orderly and comprehensive resolution” of the country’s debt challenge.

Any dialogue in good faith, the Committee of Creditors said that it will be necessary to avoid unilateral actions and seek timely exchange of economic and financial information between the international community, the government and the IMF.

The committee members are Abrdn, Amundi, BlackRock, Greylock and Ninety One, the group said in a statement.

Kathryn Exum, who leads Gramercy’s Sovereign Research department, is optimistic about debt restructuring, noting that it will be easier for borrowers than other market restructurings emerging recently.

“It is longer than that of Sri Lanka and Zambia, in terms of not having a lot of Chinese debt,” Exum said on Friday in a statement looking forward to the external restructuring.

An insider who asked not to be named said the lack of detail in the announcement could cause concern for investors.

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The Ghanaian currency, which is trading at a very sad level of 29-41 cents to the dollar, fell to the 2034 contract and lost more than 3 cents, Tradeweb data showed.

Reuters graphics

Nevertheless, some investors said that the suspension of external debt payments is expected.

“It coincides that Ghana is entering into negotiations on restructuring with various creditors, so it is not a blue head,” said Rob Drijkoningen, head of emerging market debt at Neuberger Berman, which holds some Ghanaian Eurobonds.

Ghana paid coupons Dec. 16 on the 2049 Eurobond, according to a person familiar with the matter.

It was not immediately clear whether the debt moratorium would include a $1 billion 2030 bond with a $400 million World Bank guarantee.

A finance spokeswoman told Reuters, “We are not going to talk about the specifics of the bond or any debt we owe at this time, but we are engaging with all those involved.”

Statement by Christian Akorlie and Cooper Inveen; Additional comments from Rachel Savage, Marc Jones and Jorgelina do Rosario; Written by Rachel Savage and Cooper Inveen; Editing by Karin Strohecker, Ed Osmond, Arun Koyyur and Aurora Ellis

Our principles: Thomson Reuters Trust Principles.

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