Ghana has declared a halt to debt service payments on its commercial loans, Eurobond loans, and bilateral debts.
This was confirmed by the Ghanaian ministry of finance in a press release posted on its website.
In order to allow for an orderly restructuring of the impacted liabilities, the government declared that it will stop making any debt service payments on certain categories of its external debt.
The statement read in part; “That is why we are announcing today a suspension of all debt service payments under certain categories of our external debt, pending an orderly restructuring of the affected obligations.
“This suspension will include the payments on our Eurobonds; our commercial term loans; and on most of our bilateral debt.
“We are also evaluating certain specific debts related to projects with the highest socio-economic impact for Ghana which may have to be excluded. This suspension is an interim emergency measure pending future agreements with all relevant creditors.”
The nation declared that while it will no longer be servicing its Eurobond debt, it will still be paying off its multilateral loans, such as those owed to the IMF or the World Bank.
This will not affect payments on our international debt, any additional obligations (whether multilateral or not) incurred after December 19, 2022, or debts incurred in connection with certain short-term trading facilities.
What this means: Investors in Ghanaian bonds will be impacted because they won’t get coupon payments until the problem is resolved.
As a result of this announcement, investors of Ghanaian bonds who mark to market will record losses this year.
The price of Ghanaian bonds is also anticipated to plummet in the wake of this declaration.
This brings up concerns about sovereign debts once more, especially those in foreign currencies that are frequently assumed to be risk-free.
The ministry claims that the nation is going through a serious economic and financial crisis that is having a bad effect on its finances and economy.
Furthermore, it stated that widespread risk aversion has led to significant capital flight, a lack of access to external markets, and rising domestic borrowing costs, all of which have exacerbated severe exchange rate depreciation and skyrocketing inflation rates.
Ghana also said that the current global crisis has had an impact on its financial resources, particularly its external reserves, which it says it must protect.
“As it stands, our financial resources, including the Bank of Ghana’s international reserves, are limited and need to be preserved at this critical juncture.”
In order to strengthen its external reserves, Ghana recently disclosed a $3 billion contract with the IMF. The nation also changed the terms of some of its domestic loans, requiring bondholders to accept lower interest rates while delaying some.
Additionally, Ghana stated that it was looking at other solutions for dealing with the current economic situation.
“In the interim, additional emergency measures are necessary to prevent a further deterioration in the economic, financial, and social situation in Ghana.”
Ghana recently reported that the country’s inflation rate for November was 50.3%.
