Ghana has successfully secured a moratorium with official creditors, effectively delaying debt payments until May 2026.

This strategic move aligns with the nation’s intent to negotiate a comprehensive restructuring of its $13 billion debt with Eurobond investors before the end of March. A loan moratorium, as legally sanctioned, allows for the postponement of specific loan installments’ payment obligations.

Ken Ofori-Atta, Ghana’s finance minister, provided insights into this development during an interview with Bloomberg at the World Economic Forum (WEF) in Davos. He outlined the terms of the agreement reached last week, revealing that payments on $5.4 billion of bilateral obligations would be extended to 16 and 17 years, respectively. Ofori-Atta emphasized that this arrangement, in principle, enhances confidence and momentum for the impending restructuring of the Eurobond debt.

Under the terms of the agreement with official creditors, announced recently, Ghana will repay debt payments from 2023 onwards over an extended period, spanning until 2039 and 2040.

Additionally, debt service due in 2024 will now be settled in 2040 and 2041. This structured approach aims to alleviate immediate financial burdens while providing a sustainable pathway for debt repayment in the long term.

In December 2022, Ghana took the significant step of halting payments on a substantial portion of its external debt, including the $13 billion Eurobonds. Subsequently, in October 2023, the country proposed a potential 40 percent haircut for dollar bond investors and the issuance of new instruments with extended maturities of up to 20 years and a 5 percent coupon rate. However, Ofori-Atta revealed that the terms of this proposal will now be influenced by the recent agreement with official creditors.

Meanwhile, Ofori-Atta highlighted key adjustments made in collaboration with Ghana’s partners, including a shift in the cut-off date for loans eligible for restructuring from March 2020 to December 2022. This extension grants the country additional time to engage with bilateral lenders effectively. Additionally, it was agreed to exempt $2.8 billion of bilateral obligations from debt-service payments between 2023 and 2026, providing further relief amidst the restructuring process.

Addressing the complexities of negotiations, Ofori-Atta acknowledged challenges encountered with China and other bilateral lenders. However, he expressed satisfaction that all parties involved have achieved their respective objectives through the agreement. This collective effort underscores the collaborative approach taken to address Ghana’s debt restructuring needs comprehensively.

Crucially, the agreement facilitates the disbursement of $600 million from the International Monetary Fund (IMF) to Ghana under its $3 billion IMF programme. This financial injection unlocks an additional $550 million from the World Bank, further bolstering Ghana’s economic resilience amidst ongoing restructuring efforts.

With key terms outlined and agreements reached, Ghana is poised to chart a sustainable path towards debt sustainability and economic stability.