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Bright Simons writes: Ghana begins its dance with creditors

Bright Simons writes: Ghana begins its dance with creditors

In simple terms, if the government can’t repudiate a part of the domestic debt, then it will heavily reduce the interest it pays on it and how long it takes to pay through various techniques.

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The local debt stock will be split among the four exit bonds as follows:

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As part of the trade-off for not cutting the face value of local debt, the government will freeze principal repayments of the local debt but not necessarily that of the external debt.

The transformation aimed for is one of a constant linear payout rate on local bonds from 2026 onwards, in effect phase-shifting the burden on government away from the present to the post-2026 horizon.

The only nuance involved is that the spreading of these “special” government debt obligations across the four exit bonds will follow a certain order and pattern.

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The government pledged to double down on liability management, including a fastidious commitment to improved sinking fund management to ensure that come 2026, the government will be in a position to resume servicing debt at an elevated level.

Our understanding is that the government will offer external debt holders the following terms: a 30% principal haircut, a 30% coupon haircut and a three-year moratorium (or standstill) on interest payments.

Original Story on: Citi Newsroom
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