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Accra continues its efforts to alleviate debt pressures, the finance ministry of Ghana has invited eligible holders to participate in an exchange program, offering to swap $809.9 million worth of domestic U.S. dollar bonds for new bonds with longer maturities and lower interest rates.
This move is part of Ghana’s debt restructuring plan, aimed at fulfilling the loan requirements set by the International Monetary Fund (IMF).
The country’s cocoa board has launched a debt securities exchange program based on the terms outlined in the government’s exchange memorandum. Under this program, holders of short-term debt securities are invited to voluntarily exchange their cocoa bills for longer-term debt securities.
The finance ministry’s statement confirms the details outlined in a draft memorandum previously seen by Reuters, which states that the existing bonds will be replaced by four- and five-year bonds with interest rates of 2.75% and 3.25% respectively.
In comparison, the two existing domestic U.S. dollar bonds set to mature in November 2023 and November 2026 were issued with interest rates of 4.75% and 6.00% respectively.
Holders of cocoa bills will receive five different bonds, each maturing annually from 2024 to 2028, according to COCOBOD’s announcement on Friday.
The cocoa bills represent a total principal of approximately 7.93 billion cedis, equivalent to $699 million at the current exchange rate. These bills will be converted into new bonds with a 13% yield.
The most recent cocoa bill issued in February 2023 had a yield of 32.22%.
These exchanges are part of Ghana’s broader efforts to restructure both domestic and external debt, a requirement set by the IMF in exchange for a $3 billion bailout secured in May.
Ghana successfully concluded the first phase of its domestic debt exchange in February, with 85% of eligible bondholders participating. However, the country still needs new terms for an additional 123 billion Ghana cedi to qualify for the next tranche of the IMF loan, which aims to address its severe economic crisis.
The debt includes domestic dollar bonds, cocoa bills, local currency bonds held by pension funds, as well as debt owed to the central bank and independent power producers.
With a debt-to-GDP ratio of nearly 100%, Ghana faced a default on most of its external debt in December. The country aims to reduce external debt interest repayments by $10.5 billion over the next three years.
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