Ghana Offers Debt Exchange for US Dollar Bondholders in Pursuit of IMF Loan Requirements

In its efforts to address debt pressures and fulfill International Monetary Fund (IMF) loan requirements, Ghana’s finance ministry has extended an invitation to eligible holders to participate in a debt exchange program. The program seeks to exchange $809.9 million worth of domestic U.S. dollar bonds for a package of new bonds with lower interest rates and longer maturities.

The move is part of Ghana’s debt restructuring plan to meet the conditions set by the IMF. The country’s cocoa board has initiated a debt securities exchange program based on the government’s exchange memorandum. It invites holders of short-term debt securities to voluntarily exchange their cocoa bills for longer-term debt securities.

According to the finance ministry’s statement, the bonds will be replaced by four- and five-year bonds with interest rates of 2.75% and 3.25%, respectively. This compares to the previous domestic U.S. dollar bonds with maturities in November 2023 and November 2026, which had interest rates of 4.75% and 6.00%, respectively.

COCOBOD confirmed that cocoa bill holders will receive five different bonds maturing on a staggered basis from 2024 to 2028. The cocoa bills represent an aggregate 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, whereas the last cocoa bill issued in February 2023 had a yield of 32.22%.

The debt exchange forms part of Ghana’s broader efforts to restructure both domestic and external debt, which is a prerequisite for the $3 billion IMF bailout secured in May. The country successfully concluded the first phase of its domestic debt exchange in February, with 85% of eligible bondholders participating. However, it now requires new terms for an additional 123 billion Ghana cedis to qualify for the next tranche of the IMF loan, as it grapples with its worst economic crisis in a generation.

Ghana’s debt includes domestic dollar bonds, cocoa bills, local currency bonds held by pension funds, and debt owed to the central bank and independent power producers. With a debt-to-GDP ratio of nearly 100%, the country defaulted on most external debt in December. It aims to reduce external debt interest repayments by $10.5 billion over the next three years.