Ghana bondholders dismayed by debt confusion

1 min read

By Rachel Savage and Marc Jones

JOHANNESBURG/LONDON (Reuters) – Some of Ghana’s international creditors voiced dismay on Friday after 24 hours of conflicting signals from the country’s authorities left a full-blown debt restructuring looking increasingly certain.

Deputy Finance Minister John Kumah said on Thursday his country was considering a “haircut” of up to 30% on its “foreign” debt, just hours after the country’s finance minister had referred only to the risk of debt distress and an unspecified debt exchange in the country’s state budget.

“We are negotiating on principal (haircut) of up to 30%,” Kumah had told radio station JoyFM.

In an attempt to walk back the comments, the finance ministry then sent a statement saying the “details of the different layers of the debt operation, including the terms of principal payments and interest on the public debt, are still being discussed”.

Ghana’s bond prices dipped fractionally on Friday, but with so little trading in international markets due to the U.S. Thanksgiving holiday most bondholders said the true reaction would only be seen on Monday.

“It’s not helping the situation,” one investor who requested anonymity, said of the confusion caused by the flurry of government comments.

“It gives the impression it is all a bit disorganised,” and that “It feels a bit like a band-aid too, when what we actually need is surgery here”.

Ghana, a producer of cocoa, gold and oil, is negotiating a relief package with the IMF. It has seen its cedi currency plummet against the dollar this year, while consumer inflation has soared to a 21-year high of more than 40%.

“While we are disappointed with Ghana’s decision to restructure its debt, we are not surprised,” said Anders Faergemann, an emerging market portfolio manager at PineBridge.

“The economic and financial developments this year have been deteriorating steadily, with no sense of urgency by the authorities to reverse course.”

Ghana’s Eurobonds initially fell on Friday and then pared losses, with some in the afternoon trading slightly higher than Thursday’s level.

In an analyst note, Morgan Stanley said: “While recovery values on eurobonds are higher than current prices under the initial proposal, we think the market reaction will be neutral to negative as a 3-year interest holiday will likely prove unpalatable.”

(Reporting by Rachel Savage and Marc Jones, Editing by Jorgelina do Rosario, Gareth Jones and Alex Richardson)