External debt restructuring: Fitch optimistic Ghana will reach agreement with Official Creditors by end of 2023

Ratings agency, Fitch, is optimistic Ghana will reach an agreement with the Official Creditor Committee by the end of 2023.

This will pave way for the restructuring of the country’s external debt by the middle of 2024.

According to the UK-based ratings agency, this will be one of the quickest of the timeliness of the Common Framework in recent times.

Senior Director, Emerging Market and African Sovereign Ratings at Fitch Ratings, Toby Illes speaking at the Africa Webinar Series titled “Reform and New Challenges in Western Africa”, said the design of the external debt programme will be a win-win for both the debtor and the creditor.

“On the timeline question, we are assuming the Official Creditors Committee delivers an agreement by the end of this year on the official debt. The parameter for negotiation for private creditors and we assume that it should happen promptly by the middle of 2024 which is obviously quicker sort of timeline that we have seen in some of the common framework cases; that is our assumption on the timeline”.

“The IMF programme is sort of building a specific 10 and a half billion dollars of financing relief from financing restructuring and that comes from restructuring parameter of $20 billion. So that is what we are assuming it is going to be required”, Mr. Illes added.

He furthered that the restructuring of the external debt can appear in two ways – the haircut and coupon changes.

“That [external debt restructuring] can come in different ways in terms of haircut verses coupon changes structure. So that will help the present value much is more than the domestic debt restructuring”.

Again, he said the final piece of the puzzle is the fiscal consolidation that needs to be delivered under the IMF programme.

“The IMF wants a fiscal deficit of 5.1% of GDP by 2026. We sort of taking the view and that seems the government will set us on that path of introducing measures [fiscal]. I guess the key risk we will see is the potential reform fatigue especially ahead of the elections in 2024; that will be one key risk.”