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HomeWorldGhana nears critical debt restructuring deal with international creditors

Ghana nears critical debt restructuring deal with international creditors

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Ghana and its official creditors have finalized core issues on a debt rework and will sign a draft memorandum of understanding (MoU) very soon, two sources told Reuters.

This is a key step required to access more International Monetary Fund (IMF) financing.

The memorandum formalizes a provisional deal reached in January with government creditors, including China and France, to restructure $5.4 billion of debt. The West African nation is striving to overcome its worst economic crisis in a generation.

Getting an MoU in place will pave the way for the IMF’s executive board to meet and approve a disbursement of $360 million under Ghana’s $3 billion bailout program, which is expected later this month.

“All the important issues were settled,” one source familiar with the situation said, adding that the process now involves finalizing some specific wording. The signing of the document is expected within days, according to the sources.

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A spokesperson for Ghana’s Finance Ministry did not immediately respond to a request for comment.

Ghana defaulted on most of its overseas debt in December 2022 amid soaring servicing costs, following Zambia into post-COVID default. Lingering in default complicates the government’s efforts to secure outside funding and recover from a severe economic crisis.

Like Zambia, Ghana also signed up for debt treatment under the G20 Common Framework, a process designed to facilitate quick debt overhauls and bring the newest large bilateral lender, China, into the process.

Zambia’s bondholders signed off on its restructuring earlier this week, after the southern African copper producer defaulted during the COVID-19 pandemic.

Creditors and multilateral institutions such as the IMF and the World Bank are eager to expedite Ghana’s debt restructuring. They believe the lessons learned from Zambia’s nearly four-year-long struggle to exit default could help speed up the process.

Ghana, which has already restructured most of its domestic debt, also needs to reach an agreement with holders of about $13 billion in international bonds.

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