Ghana debt restructuring (2022-2024)
A restructuring opened by the December 2022 domestic debt exchange and the suspension of external debt service on December 19, 2022, run under the G20 Common Framework and closed by the eurobond exchange in 2024.
On December 5, 2022, Accra launched its Domestic Debt Exchange Program, the DDEP. Cedi bonds held by banks, insurers and other local investors were swapped for new paper maturing between 2027 and 2038, with sharply lower coupons: 5% in 2023, then a single rate for each bond, for an effective coupon of about 9%. On December 19 the finance ministry suspended, as an interim measure, service on most of its external debt: eurobonds, commercial loans and the bulk of bilateral debt. Inflation was above 50%, and the cedi had been one of the year's worst-performing currencies. The domestic exchange settled in February 2023 with participation of about 85%. Pension funds, taken out of the first round after pensioners protested, went through a separate operation later that year. On May 17, 2023 the IMF approved a 3 billion dollar Extended Credit Facility. On the external side, Ghana applied under the G20 Common Framework; an Official Creditor Committee co-chaired by China and France reached an agreement in principle in January 2024. Holders of some 13 billion dollars of eurobonds accepted in June an exchange that closed in October, with a choice between an option carrying a 37% nominal haircut and a par option paying a 1.5% coupon, for a reduction of about 5 billion dollars in face value. What sets the case apart is the order of the sacrifices. The state made its own banks pay before its foreign creditors, eating into their capital at the very moment they were carrying its paper, and the Bank of Ghana booked heavy losses on its own holdings. For a surety or credit underwriter, a guarantee issued by a Ghanaian bank in 2023 was worth what that bank's balance sheet was worth, loaded with restructured government debt. Local bank risk and sovereign risk then merge, and they count together against the country limit.
Textbook case on simplified terms: an Accra bank holds 2 billion cedis of government bonds at 19%. The exchange replaces them, at the same nominal, with paper paying 5% in year one and 9% thereafter. It loses 280 million cedis of interest in the first year, then 200 million a year. The same bank had counter-guaranteed a 5 million dollar advance payment guarantee issued by a European bank to a European buyer, on behalf of a Ghanaian supplier. The supplier fails to deliver, the buyer calls, the European bank pays and then calls the counter-guarantee: it now has recourse against a lender whose capital has just been through the exchange and which has to find 5 million dollars.
Ghana default, Ghana DDEP, domestic debt exchange programme, Ghana eurobond restructuring
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