By Joshua Worlasi AMLANU & Ebenezer Chike Adjei NJOKU
The government has announced plans to honour a US$346 million coupon payment to Eurobond holders today, January 3, 2025. This translates to approximately GH¢5.05 billion, using the prevailing interbank rate of GH¢14.6 = US$1.
This was disclosed by President Nana Addo Dankwa Akufo-Addo during his final State of the Nation Address (SONA) to Parliament, earlier today.
President Akufo-Addo assured lawmakers of his administration’s commitment to avoiding debt defaults, stating that the payment aligns with the government’s efforts to rebuild trust with international investors.
“We cannot afford to default on our debt repayments,” the President said, citing it’s importance to maintaining Ghana’s creditworthiness.
The development has, however, heightened concerns over fiscal space and pressure on the cedi in the first quarter of the year.
Yesterday, Thursday, January 2, 2025, Finance Minister, Dr. Mohammed Amin Adam obtained Parliamentary approval for the Expenditure in Advance of Appropriation to the tune of GH¢68.13 billion.
This contained expected interest payments of GH¢20.69 billion as well as ‘other payments’, composed primarily of energy sector payments of GH¢9.46 billion.
In October 2024, Ghana resumed servicing its Eurobond debts after the completion of the exchange programme with bondholders. It made over US$520 million in coupon payments to investors.
The US$520 million coupon payment comprised $120 million in consent fees to incentivise bondholders who participated in the debt exchange programme and US$320 million in frozen coupon payments suspended since 2022.
The resumption of payments followed the successful restructuring of US$13 billion in Eurobond debt with a 98 percent participation rate from bondholders.
The next coupon payment for next year is scheduled for July 2025.
Last year, the government issued new Eurobonds with a total nominal value of approximately US$9.4 billion to investors in exchange for existing bonds restructured Eurobonds, concluding an extensive restructuring process to enhance debt sustainability under its IMF (International Monetary Fund) programme.
This included a debt service relief of US$4.3 billion between 2023 and 2026, and interest rate reduction from over 8 percent to less than 5 percent. The success of the Eurobond debt exchange followed successful completion of the Domestic Debt Exchange Programme (DDEP) in 2023, which involved the restructuring of about GH¢203 billion of domestic debt as well as reaching an agreement with the Official Creditors Committee (OCC) on the restructuring of bilateral official debt of approximately US$5.1 billion.
According to the Finance Ministry, the reduction in the face value of the Eurobonds had a significant impact on the debt stock for October 2024, and the debt-to-GDP (Gross Domestic Product) ratio. In cedi terms, the public and publicly guaranteed debt value was reduced by GH¢46.8 billion from GH¢807.79 billion in September 2024 to GH¢761.01 billion in October 2024.
The public debt to GDP ratio therefore reduced from 79.2 to 74.6 percent in September 2024 and October 2024, respectively.
Data from the Bank of Ghana suggests that the country’s external sector position improved last year, supported by a higher current account surplus and reduction in net financial outflows, leading to a strong external reserves build-up. The current account surplus increased to US$2.2 billion in the first nine months of the year, compared with a surplus of US$912 million over the corresponding period in 2023.
The current account surplus was supported by increased gold and crude oil exports as well as robust remittance inflows. This development, together with a lower net outflow of US$414 million in the capital and financial account (relative to a net outflow of US$1.4 billion in 2023) contributed to an improved balance of payments position in the first three quarters of the year.
As a result, from the beginning of the year to end-September 2024, a reserve build-up of over US$1.91 billion was accumulated, pushing Reserves up to US$7.83 billion (equivalent to 3.5 months of import cover). Gross reserves have increased further to US$7.92 billion as at November 22, 2024, when the most recent data from the central bank was published.
