Ghana’s efforts to restructure its international debt have received a significant boost with the approval of its plan by the Official Creditor Committee (OCC). This approval signifies a crucial step towards a more manageable debt profile for the West African nation.

Fairness for All Creditors: Key to Approval

The core principle behind the OCC’s green light is the concept of “Comparability of Treatment.” This principle, established by the Paris Club, ensures that official creditors like China and France (co-chairs of the OCC) do not receive preferential treatment compared to private bondholders. Ghana’s proposed debt restructuring plan has been deemed to adhere to this principle, paving the way for its acceptance.

New Bonds on the Horizon

Financial experts like Leeuwner Esterhuysen, an economist at Oxford Economics Africa, anticipate a swift issuance of new bonds. These new bonds would replace the ones currently undergoing restructuring. The expectation is for the bond exchange to commence this month and conclude by September 2024.

Recap of Previous Agreements and Next Steps

Ghana’s debt restructuring journey began in January 2024 with an agreement with the OCC to rework $5.4 billion in loans. This was followed by a significant agreement in principle reached in June with bondholder groups to restructure approximately $13 billion of its international bonds. Ghana is now the second African country, after Zambia, to reach the final stages of debt restructuring in recent weeks.

To finalize the debt rework, Ghana requires approval from all its bondholders. This will be achieved through a vote on the proposed deal. A successful vote would signify the culmination of Ghana’s debt restructuring efforts.

From Default to Restructuring: A Path Towards Sustainability

Ghana’s external debt burden of $30 billion became unsustainable in 2022, leading to a default. The COVID-19 pandemic, the war in Ukraine’s economic impact, rising global interest rates, and years of excessive borrowing all contributed to this situation. The acceptance of the debt restructuring plan by official creditors marks a positive step towards a more sustainable debt profile and a stronger economic future for Ghana.