Categories: Debt

Ghana Exits Debt Default After Restructuring US Dollar Bonds

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Ameenah Hassan

Ghana has successfully exited a debt default after completing a restructuring of its $13 billion U.S. dollar bonds.

This allows the gold-producing country to return to the global capital market. The restructuring process was completed in October 2024. It had started almost two years prior, when Ghana’s economic crisis forced it to stop debt repayments.

Bondholders voted to swap their bonds for new debt worth $4.7 billion less, lowering Ghana’s debt by more than $4 billion over the next two years to restore economic stability.

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Ghana’s Economy

This restructuring is a much-needed solution for the country, as they have been struggling with severe inflation and a sharp depreciation of its currency, the cedi.

These economic challenges were worsened by global shocks such as the COVID-19 pandemic and Russia’s invasion of Ukraine.

Ghana’s debt load will lessen as a result, providing the country with some financial breathing room and more financial management options.

President Nana Akufo-Addo, who is stepping down after two terms, hailed the restructuring as a significant milestone for Ghana. “We’ve accomplished what everyone said was impossible—we decisively resolved Ghana’s debt overhang problem,” he stated.

Before the December elections, when the economic recovery will be a key theme, the debt exchange is anticipated to increase investor confidence and stabilize the Ghanaian economy.

Mahamudu Bawumia, the vice president of Ghana, and John Mahama, the former president, will square off in the election, with both candidates likely to emphasize the financial crisis’ aftermath.

Nigeria: A Huge Contrast

Nigeria, the biggest economy in West Africa, on the other hand, is a stark contrast to Ghana’s circumstances.

Although Nigeria has not defaulted on its debt, the country is on the edge of a debt crisis.

Rising debt levels coupled with heavy borrowing to finance budget deficits have raised concerns about Nigeria’s fiscal sustainability. As of 2023, Nigeria’s public debt stood at over $100 billion, with the country spending a significant portion of its revenue on debt servicing.

Unlike Ghana, which has embarked on a restructuring program, Nigeria has opted for more short-term fixes, such as borrowing from international markets and domestic sources to bridge its funding gaps.

This approach has led to an increase in the country’s debt-to-GDP ratio, which Trading Economics has projected to exceed 40% by 2025.

Furthermore, because fuel subsidies were removed in 2023, Nigeria experienced inflationary pressures comparable to those experienced by Ghana.

Although the removal was meant to increase government revenue, it caused fuel prices to soar and inflation to rise above 20%, further taxing the economy. Similar to Ghana, Nigeria also faces challenges with its declining currency, the naira, which has seen a notable decline in the value of the US dollar in recent times.

While Ghana’s restructuring gives the nation a chance to relaunch its economy, Nigeria’s growing debt without a clear restructuring plan could lead to more problems in the future.

Other African Countries: A Growing Trend of Debt Restructuring

Ghana’s debt restructuring mirrors efforts by other African nations struggling with economic recovery. Zambia, for instance, resolved a four-year-long debt restructuring, securing over $6 billion in relief through the G20’s “common framework.”.

Ethiopia, on the other hand, is presently reorganizing bonds worth $1 billion despite difficult negotiations. Its bondholders criticized a lack of transparency from Ethiopia’s government, complicating talks with creditors.

Ethiopia’s efforts despite the conflict demonstrate how many African nations are looking for debt relief following worldwide economic downturns.

Kenya, a major African economy, may have to have similar restructuring talks due to its growing public debt. According to cytonn, Kenya’s public debt is at 70% of GDP, and it’s government has imposed many measures to reduce overspending.

Other nations, such as Angola and Mozambique, have also sought relief through IMF programs aimed at debt restructuring and economic stabilization. Angola, Africa’s second-largest oil producer, has benefitted from higher oil prices, which have helped its economic recovery, but its high debt-to-GDP ratio remains a concern.

Based on the debt accumulated during global downturns, particularly after the COVID-19 pandemic, these cases are showing a larger trend in Africa that has required debt relief efforts.

Ameenah Hassan

Ameenah Hassan is a content writer with experience in public relations. She has contributed to Arbiterz since 2021, writing research-based news and features on business. She is currently pursuing a degree in Mass Communication at the University of Lagos.