According to credible sources, Ghana has made a debt restructuring proposal to its official creditors as the nation fights to emerge from its worst economic crisis in a generation.
The “working proposal” is said to be an essential first step for the producer of cocoa, gold, and oil to interact with the formal creditor committee following its formation in May. However, sources have indicated that it is not legally binding.
The proposal is expected to be the start of a more extensive negotiation process in which several ideas will probably be exchanged.
According to a government official, Ghana plans to complete restructuring its internal debt before beginning negotiations with its official, bilateral creditors, and foreign bondholders.
The proposal’s specifics and the date it was sent were not confirmed by the sources. The finance ministry of Ghana’s spokesman declined to react right away.
Ghana aims to cut $10.5 billion in interest payments on its external debt over the next three years to successfully implement a $3 billion loan deal from the International Monetary Fund (IMF).
Its debts to countries including China and members of the Paris Club of creditor nations were $5.4 billion of the $20 billion external debt due for restructuring, as of the end of 2022, according to a government presentation to investors. The total external debt stock was about $30 billion.
Ghana completed a domestic debt exchange with 65% of holders of local bonds in February and is also seeking relief on the bulk of the remainder of its domestic debt, including deals with pension funds, labour unions and independent power producers.
It is restructuring its debt under the Common Framework process, set up by the G20 in 2020 to bring China and other newer creditor nations into joint sovereign debt restructuring negotiations, for its external debt rework.
