Ghana is making progress in its debt restructuring, softening its stance slightly this week as it proposed that it will pay a 5 percent coupon rate on 2023 local currency debt, that is the subject of the ongoing debt swap negotiations.
This is a departure from the country’s earlier stance of paying no interest on debt this year. The shift, however, has both positives and negatives. It is positive from a progress standpoint on the restructuring of local debt, showing that the government is still flexible as it looks to further negotiate. However, holders of foreign-currency debt will be getting nervous as any concessions made to local-currency holders will potentially increase the burden that foreign-currency debt holds as the costs will need to be absorbed somewhere.
As investors fret over what might happen to foreign-currency bondholders, the bonds have traded fairly steadily in recent sessions. The more concessions given to local-currency holders, however, the more pressure might be placed on the country’s external bonds. Investors in Ghana’s external debt, therefore, will be watching the negotiations closely.
