The Economist Intelligence Unit is advising the Government of Ghana to go into negotiations with private creditors or Eurobond holders with tact since the creditors will demand different and complex restructuring terms compared to bilateral creditors.
The UK-based firm says it has doubts whether negotiations with the private creditors will be concluded by half-year of 2024.
Finance Minister, Ken Ofori-Atta, has stated that the government will begin negotiations with Eurobond holders and commercial creditors, seeking 40.00% haircut on coupons.
But speaking on the Africa Outlook 2024, Principal Economist, Benedict Craven, said it is difficult to negotiate with private creditors.
“Countries with a more complex creditor profile like Ghana and Zambia, they’ve had setbacks in pretty much every stage of the restructuring and it doesn’t seem like any of the country would be able to conclude talks before mid-year. Our new concern here is the optics, the oldest delays sent to other sovereigns with high-risk effects. Perhaps you need to conceal the impending default rather than pursuing early debt treatment”.
He however said “Zambia and Ghana will establish some precedence if they can speed up the early stages of negotiations”, adding “There are a lot of fundamental disagreements that remain among various creditor groups and official creditors themselves. And these are bound to reappear, potentially leaving economies [debt default countries] in limbo for lengthy periods if they go down the common framework route”.
He added that there’s no guarantee there’ll be a compatibility of debt treatment that’s acceptable to private creditors and vice versa even if a deal is reached
“One of the issues that have cropped up in the G20 framework is that even if you get the deal among the official creditors who get classified, there’s no guarantee that there’ll be a compatibility of [debt] treatment that’s acceptable to private creditors and vice versa.”
“So in Zambia’s case, the private creditors can come up with a deal and can be rejected by official creditors. It’s issues like this that is really going to contribute to the slow process every time creditors are confronted with a different debt profile from a different sovereign”, he added.
Ken Ofori-Atta had earlier said “I am expecting that we negotiate in good faith to ensure the country comes back quicker than later”.
He is hoping to build on the momentum, following the deal reached with the bilateral creditors on terms to restructure some $5.3 billion last week.
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