Ghana started talks with China to restructure bilateral loans as the West African nation slowly moves forward in its goal to reorganize about $30 billion of public debt.
(Bloomberg) — Ghana started talks with China to restructure bilateral loans as the West African nation slowly moves forward in its goal to reorganize about $30 billion of public debt.
A Chinese delegation has ended a three-day mission to the Ghanaian capital, Accra, to discuss how the $1.9 billion Ghana owes China will be treated. The debt represents a third of all bilateral loans.
“Discussions have so far been highly cordial and fruitful,” Ghana’s Finance Ministry said in a statement posted on its website late Wednesday.
Ghana, which has reorganized $6.9 billion of domestic debt, has missed a self-imposed deadline to reach an agreement on bilateral debt by the end of February, sinking its eurobonds. Commercial creditors such as Blackrock and Allianz are waiting for that accord to start their own negotiations with Ghana over as much as $13 billion of bonds.
The nation’s dollar bond maturing in 2032 declined to 36 cents in the dollar at 11:33 a.m. in London on Thursday, the lowest since Dec. 22.
Ghana had planned to discuss restructuring with commercial creditors under the Group of 20 Common Debt Framework, which was meant to expand the Paris Club of sovereign creditors to include China and other creditor countries. However, Ghana has started separate talks with China, now the world’s largest bilateral lender to developing nations.
Moreover, under the framework, bilateral and commercial debt holders are encouraged to agree to similar terms, but Ghana’s Finance Minister Ken Ofori-Atta has warned private lenders to brace for more losses than bilateral creditors. The government is planning to offer to reschedule payments on bilateral debt without principal haircuts, Bloomberg reported, citing people familiar with the matter.
Ghana wants to avoid the fate of Zambia and Sri Lanka, where debt restructuring negotiations have stalled over disagreements between China, the US and other Paris Club nations.
China wants loans made by the World Bank and other multilateral lenders to be included in any restructuring. That’s partly driven by a Chinese view of those institutions as proxies for US power. But the US and World Bank have rejected the idea, arguing any haircut would undermine those bodies’ ability to respond to crises and make concessional loans.
“Settling Ghana’s debt is the shared responsibility of Ghana and all international partners and requires joint efforts from all sides,” a Chinese Foreign Ministry spokeswoman said Thursday during a regular briefing in Beijing. “We thus call on multilateral financial institutions and commercial lenders from which developing countries mainly borrow to participate in the debt relief efforts.
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