…as $5.1bn debt relief deal eases Ghana’s fiscal burden
By Eugene Davis
Ghana has successfully restructured $5.1 billion in official bilateral debt with 22 creditor countries. Under the new arrangement, all debt service payments due between 20 December 2022 and 31 December 2026 will be rescheduled, capitalised, and repaid over a period from 2039 to 2043.
This follows Parliament’s approval of the government’s request to reschedule debt obligations through bilateral agreements with each member of the Official Creditor Committee (OCC). The OCC includes Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, India, Israel, Italy, Japan, Netherlands, Norway, Saudi Arabia, South Africa, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
According to the Finance Committee report, the restructuring is a key part of Ghana’s strategy to address its debt sustainability challenges.
Importantly, the rescheduled debt will not accrue interest at the original contractual rates, to avoid placing additional strain on the country’s repayment capacity.
Parliament’s approval was sought in line with Article 181 of the 1992 Constitution and Section 56 of the Public Financial Management Act, 2016 (Act 921), to enable the government to finalize and implement the debt restructuring agreements.
Indicative terms of Bilateral Debt Restructuring
The following are the indicative terms of the Bilateral Debt Restructuring:
All debt service payments falling due from 20th December 2022 to 3lst December 2026 (Rescheduled Amounts) will be rescheduled, capitalised and paid between 2039 and 2043.
The rescheduled debt service will not be capitalised at the contractual interest rate, as it would place an undue burden on Ghana’s ability to meet its debts service obligations.
The OCC has set a range of 1% to 3% to capitalise the Rescheduled Amounts, depending on the original contractual interest rate. Debt service on fixed rate facilities with contractual interest rate: Of less than 1% will be capitalised at the existing contractual rate;
Equal or greater than 1% but less than 2% will be capitalised at 1% per annum;
Equal or greater than 2% but less than 5% will be capitalised at 2% per annum; and
Equal or greater than 5% will be capitalised at 3% per annum.
For floating-rate facilities, the original contractual rate used to set the capitalisation rate is based on the margin rate referred to in an underlying loan agreement plus the market value of the floating reference rate prevailing on 31″ December, 2022. Accordingly, future debt service payments will be made as follows:
Rescheduled Amount falling due from 20″ December, 2022 to 31″ December, 2022 will be capitalised, rescheduled and repaid on |” January, 2039;
Rescheduled Amount falling due in 2023 will be capitalised, rescheduled and payable 50% on 1″ July, 2039 and the remaining 50% capitalised an additional year and paid on 1″ July, 2040;
Rescheduled Amount falling due in 2024 will be capitalised, rescheduled and payable 50% on 1″ July, 2040 and the remaining 50% capitalised an additional year and paid on 1″ July, 2041;
Rescheduled Amount falling due in 2025, will be capitalised, rescheduled and payable 50% on 1″ July, 2041 and the remaining 50% capitalised an additional year and paid on 1* July, 2042; and
Rescheduled Amount falling due in 2026, will be capitalised rescheduled and payable on 1″ July, 2042 and the remaining 50% capitalised an additional year and paid on 1″ July, 2043.
Other Provisions for the Bilateral Debt Restructuring include: restructuring all commercial debt within the debt treatment perimeter as defined by the IMF and OCC on terms assessed to be comparable to those of the OCC.
limiting disbursements on bilateral loan funded projects to within the level set by the IMF (i. e US$250 million per annum) iii. seeking comparable debt treatment on a creditor-by-creditor basis;
Not violating the provisions of the MoU. Any breach would give rise to the OCC, acting unanimously, to declare the debt treatment null and void and to restore original terms; and
Not servicing any debt and remain in arrears with any other eternal creditors until those have been restricted with terms assessed to be comparable by the OCC.
Rationale for the bilateral debt restructuring
The Committee observed that due to the country’s inability to repay its debt in 2022, Government applied and was granted the use of the Common Framework for Debt Treatment beyond the Debt Service Suspension Initiative. Government
Background
Ghana’s Debt Restructuring Under the Common Framework
On 13 December 2022, Ghana applied to the G20/Paris Club’s Common Framework for debt relief.
A debt service suspension was announced on 19 December 2022, covering bilateral and commercial loans.
An Official Creditor Committee (OCC) co-chaired by China and France was formed on 12 May 2023, targeting Ghana’s US$5.1 billion bilateral debt.
Ghana and the OCC reached an Agreement-in-Principle (AIP) on 12 January 2024, offering US$2.8 billion in debt service relief during 2023–2026 under the IMF-supported programme.
The AIP was formalized in a Memorandum of Understanding (MoU) signed by all OCC members and Ghana by 28 January 2025.
Government seeks Parliamentary approval (under Article 181 of the 1992 Constitution and Section 56 of the PFM Act, 2016) to conclude and finalize restructuring terms.
