Ghana overseas debt restructuring seen delayed not scuppered by new fin min

February 15, 2024
Impact of Ghana's Finance Minister replacement on debt restructuring
Ken Ofori-Atta

The removal of Ghana's finance minister and the appointment of in his place has raised caution among international investors. This development comes amidst ongoing negotiations for the restructuring of Ghana's overseas debt, a process critical for the country's economic stability, especially ahead of national elections in December.

While the replacement of the finance minister is not expected to completely derail debt restructuring negotiations, investors are wary of potential delays and uncertainties introduced by the transition. The prices of Ghana's Eurobonds slipped in response to the fresh uncertainty, reflecting investor concerns.

Ghana is seeking relief on approximately $13 billion owed to private creditors holding Eurobonds. The previous finance minister, , had overseen debt restructuring efforts following the country's default on much of its external debt in December 2022 due to escalating debt servicing costs and inflation.

Despite the change in leadership, analysts believe that the broad parameters of the debt restructuring negotiations are well understood by both parties and are unlikely to be significantly altered. However, there is a risk of delays as the new finance minister familiarizes himself with the ongoing negotiations.

Ghana's economy has begun to recover, aided by a $3 billion loan program with the () and successful debt restructuring deals with official creditors such as and France. However, completing negotiations with private creditors remains a crucial step for the country's financial stability.

Some bondholders prefer the use of state-contingent debt instruments to bridge differences in economic outlook and facilitate debt restructuring. The reshuffle in Ghana's may impact the negotiation dynamics, although the extent of its influence remains uncertain.

Analysts have varied views on the implications of the finance minister's replacement. While some anticipate potential fiscal consolidation slippages in an election year, others remain confident, citing IMF support and the anchoring of Ghana's fiscal path by the IMF program.

Overall, the IMF reiterated its commitment to assisting Ghana in achieving its objectives, signalling continuity in cooperation despite the leadership change in the finance ministry.

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