Ghana’s debt management efforts appear to be facing fresh snags – this time, over a $768 million loan from Afreximbank. The government wants the debt restructured, but the bank is holding its ground insisting on full repayment.
The standoff is raising concerns about possible delays in the country’s external debt resolution and even the risk of a legal battle.
This debt impasse is a critical test of Ghana’s hard-fought restructuring efforts. The bone of contention between Ghana and Afreximbank is a disagreement over how the $768 million loan should be treated and whether Afreximbank qualifies for the kind of immunity typically reserved for multilateral lenders like the International Monetary Fund (IMF) or World Bank.
The government wants Afreximbank to accept restructuring terms in line with those agreed by bilateral creditors, such as China and private bondholders; all of whom have taken haircuts under the G20 Common Framework.
Put simply, Afreximbank prefers to be treated as a preferred creditor, which means it would be repaid in full and spared any losses. But government disagrees and both sides are still locked in negotiations.
With Ghana’s external debt restructuring process involving the Official Creditor Committee and international coordination, this remains a diplomatic standoff at least for now.
The threat of legal action can however not be ruled out particularly because Afreximbank has a history of enforcing loan agreements through the courts.
The credit facility in question was obtained in 2022 as a critical bridge financing to support budgetary needs at the time of a shut-out of the international capital market, credit ratings downgrades and a depreciating currency. The loan was structured in multiple tranches and backed by Parliamentary approval.
The seven-year tranche was split into two components. About $109.3 million at an interest rate of 6.49%, inclusive of fees and $101 million at a rate of 9.55%. A $350 million tranche also carried a 10-year term with a 9.33% interest rate.
Then Finance Minister Ken Ofori-Atta had pushed for the exemption of Afreximbank loans from Ghana’s debt restructuring. He cited the country’s ratification of the bank’s founding treaty, which prohibits any restructuring or moratorium on its credit facilities.
But at a time of relative economic stability, the current government should be prioritising dialogue as a legal route would only prolong the process, risk derailing macroeconomic gains and delay Ghana’s much-anticipated return to the international capital markets.
It would also send the wrong signals to investors already watching Ghana’s debt restructuring closely.
“I would not encourage AfreximBank to also take Ghana to court. Ghana should also not be in a hurry to go to court. I think going to the negotiation table and dialoguing will be the way forward. There will be some consensus”, says Economist Prof. Peter Quartey of the University of Ghana’s Institute of Statistical, Social and Economic Research (ISSER).
Ghana must engage in high-level talks possibly involving the African Union, or even institutions like the IMF or World Bank to help mediate and avert an escalation or a renewed debt crisis.
“What Ghana needs to do is to learn from all these painful experiences and all these restructuring difficulties, not to borrow beyond the expected threshold and remain prudent. That will bring us to a point where we do not have to be going around begging for reduction, begging for haircut, begging for restructuring. We should avoid this situation going forward”, Prof. Quartey advised.