Ghana’s Eurobond debt will reduce drastically to between $7 billion and $9 billion from $13.1 billion dollars if the bondholders accept a haircut of between 30% and 40%.

Subsequently, interest payments are projected at between $460 million and $390 million annually for the next 20 years.

Speaking to Joy Business, Associate Professor of Finance at Andrews University in Michigan, Williams Peprah said this will give the government some fiscal space to undertake other critical projects in the economy.

From the discussion of what the Finance Minister [Ken Ofori-Atta] has mentioned, if we are able to attain a 30% to 40% haircut on the $13.1 billion, the Eurobond debt will reduce drastically to between $9.9 billion and $7 billion. And this in respect is going to reduce the interest payment for the next 20 years between $460 million and $390 million a year”.

“So this means that we'll be able to have enough room to plan, and it is going to reduce our debt burden so that we will be able to achieve the Gross Domestic Product to debt ratio that we have all been envisaging to achieve”, he explained.

His only concern for now is whether the Euro bondholders will buy into the proposal by the Finance Minister.

“So this is very significant if the Euro bondholders would buy into this. I know this is a dollar-denominated investment, so most of them accepting first a haircut, it's something that is really going to affect them. But it is better than losing their money or the government refusing to pay.”

“So for almost eight months that they have not received any coupon payments or principal payments, it is affecting their portfolios, so such negotiations are very important”, he added.

Finance Minister, Ken Ofori-Atta, updating investors in London about Ghana’s debt restructuring said Eurobond holders may face a nominal haircut of between 30% and 40% as part of the restructuring of the external debt.

According to him, coupons may also not exceed 5% with final maturities of not more than 20 years.

“So in our indicative scenario, the restructuring terms for bondholders involve maybe a nominal haircut between 30 and 40%, looking at maybe coupons of not more than 5% and final maturities of not more than 20 years are sort of the contours of what we are discussing and analysing”.

Ghana sovereign bonds fall sharply

Meanwhile, Ghana's sovereign dollar bonds dropped sharply on Tuesday, October 17, 2023, after a government presentation of debt rework scenarios that aimed for a haircut of 30% to 40% on the principal disappointed investors.

Some bonds fell to their lowest level in three months, with the 2061 issue down as much as 2.9 cents on the dollar to 38.9 cents, Tradeweb data showed.

The bonds later recovered some ground, though were still down between 1.5 cents and 2.5 cents on the dollar.