‘The worst that was expected has happened’ – Joe Jackson on suspension of payment of Eurobond debts

Chief Operations Officer at Dalex Finance, Mr Joe Jackson has said the worst that was expected in Ghana has happened following the suspension of payment on some external debts including the country’s Eurobonds.

According to the Ministry of Finance, the suspension forms part of an interim emergency measure to save the country’s ailing economy.

“This suspension will not include the payments of our multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022 or debts related to certain short term trade facilities,” a statement issued by the Ministry on Monday, December 19 said.

This comes after the sector minister, Ken Nana Yaw Ofori-Atta, announced a domestic debt exchange programme, expected to take off at the end of December.

Under the programme, domestic bondholders will be asked to exchange their instruments for new ones.

Existing domestic bonds as of Thursday, December 1 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.

The annual coupon on all of those bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity with coupon payments done semiannually.

The statement on Monday, December 19 said the country’s financial resources, especially Bank of Ghana’s international reserves, is “limited and need to be preserved at this critical juncture”.

“That is why we are announcing today a suspension of all debt service payments under certain categories of our external debt, pending an orderly restructuring of the affected obligations.”

The statement also says an evaluation programme is underway on some of the specific debts related projects with the highest socio-economic impact for Ghana.

Some of these projects may have to be excluded after the evaluation, the statement hinted.

The Ministry says all stakeholders, especially external creditors, will be engaged in discussions in order to have a “fair, transparent and comprehensive debt restructuring exercise in line with international best practices”.

In a tweet, Mr Jackson said “Ghana has officially defaulted on its external debt payments. The worst that was expected has happened. It almost seems like an anticlimax.

“The event has passed without much comment even though Ghana has ‘crossed the Rubicon’.”