Debt restructuring takes another step forward

Ghana’s long-running debt restructuring took another step towards the finish line on Monday after the government said it struck an agreement in principle on a debt rework with holders of some $13 billion of international bonds.

Below is a condensed timeline of key events:

• February 2022 – Credit ratings agency Moody’s downgrades Ghana’s credit rating from B3 to Caa1, saying the country had a “very high credit risk”, after Fitch cut its Ghana credit rating to B- from B in January.
• March 2022 – Ghana’s central bank hikes interest rates by a record 250 basis points to 17% in a bid to stem rocketing inflation and a weakening currency.
• April 2022 – The cocoa producer’s parliament approves an “e-levy” tax on electronic payments.
• May 2022 – Ghana’s then-finance minister Ken Ofori-Atta says it will manage its debt without International Monetary Fund (IMF) help.
• July 1, 2022 – Ghana’s government changes its mind and asks the IMF for a loan, amid street protests against growing economic hardship.
• July 20, 2022 – Ghana’s parliament approves a $750 million loan from the African Export Import Bank as it scrambles to avoid default.
  ** August 2022 – Ghana’s central bank delivers another record interest rate hike, as inflation continues climbing.
• Dec. 5, 2022 – Ghana launches a domestic debt exchange in a bid to deal with spiralling debt payments.
• Dec. 12, 2022 – Ghana and the IMF reach a “staff-level agreement” on a $3 billion rescue package, with debt restructuring one of the conditions.
• Dec. 20, 2022 – Ghana says it will default on most external debt.
• ⁠* Dec. 22, 2022 – Local pension funds are exempted from the domestic debt exchange after unions threaten a general strike.
• January 2023 – Ghana requests a debt restructuring under the G20’s Common Framework process, set up in response to the COVID-19 pandemic to include China, India and other creditor countries not in the traditional Paris Club of wealthy lending nations.
• February 2023 – Ghana’s finance ministry says the domestic debt exchange closed with about 85% of “eligible” bondholders on board, after five deadline extensions. The country’s official bilateral creditors start talks to form a committee.
• ⁠* March 2023 – Ghana’s government and a group of holders of about $13 billion in international bonds start debt restructuring talks via their respective advisers.
• May 2023 – Ghana’s official creditors form a committee co-chaired by China and France and commit to restructuring their loans to the country. These “financing assurances” pave the way for the IMF board to approve the $3 billion rescue loan, five days later.
• ⁠* June 2023 – Ghana sends a restructuring proposal to official creditors, as it aims to cut $10.5 billion in interest payments over the following three years.
• October 2023 – Ghana and the IMF reach a staff-level agreement on the first review of the $3 billion loan programme, with a second $600 million payout contingent on agreeing a debt rework plan with official creditors. The finance ministry proposes a 30-40% haircut to bondholders; bond prices sink in response.
• January 2024 – Ghana reaches a deal-in-principle on Jan. 12 to restructure $5.4 billion of debt to its official creditors, with the IMF subsequently approving the next loan payout a week later.
  The government tells overseas bondholders that it wants a simple debt restructuring, rather than using any “state-contingent debt instruments”, which link payouts to variables such as economic growth or commodity prices.
• February 2024 – Ghana’s president replaces Ken Ofori-Atta as finance minister with his deputy Mohammed Amin Adam, who pledges to keep the IMF programme on track.
• March 2024 – Ghana and the international bondholder group kick off formal talks.
• April 2024 – Ghana and its bondholders fail to strike a deal, with the government saying the proposals put forward were not extensive enough to cut its debt to a level that the IMF would judge as sustainable.
• May 2024 – Ghana’s government confirms that a draft memorandum of understanding has been received from its bilateral creditors. Once signed, the MoU will formalise the $5.4 billion agreement reached in January with the likes of France and China.
• June 2024 – Ghana and its international bondholders reach an agreement in principle on restructuring of its dollar bonds.