Debt restructuring: Will Ghana secure international bondholders’ buy-in?

Ghana has extended an invitation to holders of approximately $13 billion of its international bonds to consider swapping their holdings for new instruments. The bondholders have a deadline until the 30th of the current month to accept this offer. Notably, those who opt-in before the early deadline on the 20th of this month will be entitled to a 1% consent fee as an incentive. Discussing these developments, John Gatsi, the Dean of the University of Cape Coast School of Business, shared valuable insights on the matter during a recent CNBC Africa interview. Gatsi explained that the government has presented investors with two options to choose from. The first choice involves accepting a 37% haircut on their bonds, while the second option allows them to receive a 1.5% interest rate on new bonds maturing in January 2027. He emphasized that both options have been designed by the government to benefit Ghana. Initial feedback from the Committee of Ghana's International Bondholders and a regional group representing over a quarter of the bonds signaled support for the restructuring program, showcasing confidence and a willingness to contribute to Ghana's economic growth and stability. The collaborative effort of bondholders and their acceptance of the offer reflect a positive relationship between Ghana and its investors. This optimistic sentiment bodes well for Ghana's prospects of reengaging with the international debt market in the future. The successful handling of the restructuring process by Ghana has garnered widespread approval and signifies a unified commitment toward resolving the country's financial challenges. Speaking on the International Monetary Fund's (IMF) extended credit facility program for Ghana, Gatsi raised concerns over the fiscal discipline during an election year. He pointed out recent incidents highlighting potential lapses in adherence to budgetary and procurement procedures, indicating the need for vigilance in managing political spending. While acknowledging the efforts of monetary authorities in addressing inflation and fostering investor confidence, Gatsi underscored the urgency of developing comprehensive strategies to tackle pressing issues like youth unemployment and economic productivity. Despite the IMF program's focus on macro fiscal indicators, Gatsi emphasized the importance of implementing targeted initiatives to alleviate the cost of living crisis and enhance job creation. Ensuring sustainable economic growth requires a holistic approach that addresses critical societal challenges, beyond meeting fiscal targets. As Ghana navigates its debt restructuring process and strives for long-term financial stability, a proactive and inclusive economic agenda that prioritizes the well-being of its citizens will be essential for sustained progress and prosperity.