News Guide Africa

Tag: Debt restructuring

  • DDEP aftershocks and stagnant growth threaten stability of insurance sector

    DDEP aftershocks and stagnant growth threaten stability of insurance sector

    By Adnan Adams Mohammed

    Ghana’s financial landscape is facing a dual crisis in the insurance sector as industry titans and global consultants warn of deep-seated vulnerabilities.

    Even as the broader economy shows signs of recovery, the insurance industry remains “dangerously exposed” to the lingering effects of the Domestic Debt Exchange Programme (DDEP), while penetration rates have hit a stubborn ceiling.

    Speaking at a high-level financial summit in Accra, elder statesman and business mogul Sir Sam Jonah delivered a sobering assessment of the industry’s health. He cautioned that the insurance sector has yet to fully recover from the “surgical” impact of the 2022 debt restructuring.

    “The insurance sector remains heavily exposed to the systemic risks birthed by the DDEP,” Sir Jonah remarked. He pointed out that while banks received significant liquidity support and regulatory forbearance, insurance companies the traditional custodians of long-term national savings have been left to navigate the fallout with far less cushion.

    The primary concern lies in the devaluation of government securities held by insurers, which has eroded capital buffers and hindered the ability of some firms to meet large-scale claims promptly. Sir Jonah warned that without targeted intervention, the sector’s role as a bedrock of the domestic capital market could be permanently compromised.

    The 1% barrier: Deloitte reports stagnation

    Compounding these stability concerns is a new report from Deloitte Ghana, which reveals that insurance penetration in the country has stalled at a mere 1%. Despite years of digital transformation efforts and the introduction of a new Insurance Act, the sector has failed to break the structural barriers keeping the vast majority of Ghanaians uninsured.

    Deloitte’s analysis identifies several “structural bottlenecks” contributing to this stagnation:

    Low Disposable Income: The high cost of living has forced many households to prioritize immediate needs over long-term protection.

    Trust Deficit: Delayed claim payments following the 2022 financial crisis have fueled public skepticism toward insurance products.

    Informal Economy Gaps: Traditional insurance models remain poorly suited for the informal sector, which constitutes over 80% of Ghana’s workforce.

    Industry experts are calling for a “radical rethink” of the sector’s architecture. Key recommendations emerging from both the Deloitte report and Sir Jonah’s address include:

    Regulatory Recapitalization: A possible move by the National Insurance Commission (NIC) to further raise capital requirements to ensure only “resilient” players remain.

    Tax Incentives: Calls for the government to provide tax breaks on life insurance premiums to encourage uptake among the middle class.

    Innovation in Micro-insurance: Leveraging mobile money to create “sachet-sized” insurance products tailored for market traders and small-holder farmers.

    As the government moves forward with its 2026 “Golden Reset,” the fragility of the insurance sector remains a critical blind spot that could undermine long-term financial stability if left unaddressed.

     

     

  • Gov’t prepares to honor US$1.4bn Eurobond debt servicing next year …as it completes 2025 obligations

    President John Mahama in a tit-a-tit with Dr Cassiel Ato Forson

     

    By Adnan Adams Mohammed

     

    The Government of Ghana as part of its Eurobond debt servicing obligations under the Debt Restructuring negotiations has made the last batch payment of US$349.52 million.

     

    This is bring the total of payment made towards Eurobond servicing since October 2024 to US$1,174.64 million.

     

    The Ministry of Finance in a statement released today gave the breakdown as follows: In October 2024, the government made an initial payment of US$475.60 million, covering obligations due under the restructuring agreement, including the first post-restructuring debt service.

     

    “In January 2025, the government paid US$349.52 million. And, in July 2025, a further US$349.52 million has been paid. This brings Ghana fully up to date on all scheduled Eurobond debt service obligations for 2025”, the statement signed by the Finance Minister, Dr Cassiel Ato Forson read.

     

    “Looking ahead to 2026, a total debt service of US$1,409.06 million is scheduled.

     

    “This timely payment reaffirms Ghana’s commitment to macroeconomic stability, prudent debt management, and constructive engagement with external creditors.”

     

    The Ministry expects that, the timely honoring of the debt obligations will:

    “Positively influence Ghana’s credit ratings trajectory in the months ahead, as it demonstrates continued discipline in debt servicing post-restructuring;

     

    “Boost investor confidence in Ghana’s sovereign credit profile and economic recovery programme; and

     

    “Support foreign exchange market stability, as it has been incorporated into the Bank of Ghana’s reserves and liquidity management strategy.”

     

     

  • Airtel-Tigo Debt: Gov’t negotiating haircut, cash payment reduced to US$10m


    “Minister Sam George reveals details of Airtel-Tigo’s US$400m debt restructuring during a press briefing in Accra.”

     

     

    Adnan Adams Mohammed

     

    Government of Ghana is negotiating with ATC over a mounting debt inherited for acquisition of Airtel-Tigo by the previous NPP administration for a ‘haircut’ arrangement.

     

    The debt, which stands at US$ 400 million has been reduced to US$ 200 million, but with a cash payment component of US$ 10 million which is to be paid over a period of time, the Minister for Communications, Digital Technology and Innovation, Samuel Nartey George has revealed.

     

    However, the company continues to face financial challenges, with monthly operating losses amounting to GH¢20 million as the Minister has criticized the previous government’s acquisition of Airtel Tigo, which was rebranded as AT, for a reported purchase price of US$1. He described the decision as “ill-informed and reckless,” highlighting that the company had a debt portfolio of US$400 million at the time of purchase and lacked sufficient revenue to cover its overhead costs.

     

    “The previous government acquired Airtel Tigo and rebranded it as AT with a reported purchase of US$1. Nothing could have been more disingenuous and unpatriotic. When the company was bought its debt portfolio stood at US$400million and its revenues could not meet its monthly overheads”, Sam George told journalists at a Meet-the-Press event in Accra, last week.

     

    “The core and dealing platforms have reached the end of life and neither Bharti, which operated Airtel, nor Milicom, which operated Tigo, had failed to make any meaningful investments in both companies over the preceding five years.

     

    “The decision to step in at the time can best be described as ill – informed and reckless. It was an abdication of responsibility by the then administration and minister to the best interest of Ghana.”

     

    “…Today after a debt restructuring arrangement, the debt portfolio at AT sits at about US$200million, rising every month as the company makes a monthly operating loss of GHc20million.

     

    “The bleeding needs to be stopped and urgent steps are underway to engage the company’s creditors in negotiating haircuts to ensure the company’s viability,” Sam George stated.

     

     

  • Ghana’s economic woes are self-inflicted says World Bank… cautions against rushing back to capital market

     

    “World Bank warns Ghana against premature return to capital markets.”

     

    Adnan Adams Mohammed

     

     

    Ghana’s economic challenges have been attributed by the World Bank to unguided fiscal systems which led to overburdened debt accumulation and unmatching revenues.

     

    The World Bank believes that weak expenditure controls enabled a vicious circle leading to reduced fiscal space and unsustainable debt accumulation, particularly over-reliant on external commercial debt, this being made worse by declining tax revenue in the years preceding the outbreak of the country’s still ongoing economic crisis.

     

    Among its key findings in the Ghana Public Finance Review, the Bretton Woods institution indicated that the lack of fiscal discipline was marked by weak budgetary institutions, high fiscal liabilities from the financial and energy sectors, and insufficient revenue collection.

     

    “Again, a costly clean-up of the financial sector and ongoing losses in the energy sector increased fiscal pressures”, the report titled “Building the Foundations for a Resilient and Equitable Fiscal Policy” asserted.

     

    “With precarious fiscal conditions, the prolonged and expensive fiscal response to the COVID-19 and the subsequent deterioration of global conditions plunged Ghana into a full-fledged crisis – and into debt distress – in 2022.”

     

    Also, the Bank emphasized that Ghana’s fast Gross Domestic Product (GDP) growth, fuelled by debt, left it highly vulnerable to global shocks.

     

    The report, however, noted that Ghana has made progress toward economic stabilisation but warned that more needs to be done to meet monetary and fiscal targets and create lasting fiscal space.

     

    It proposed that stronger domestic revenue mobilisation is necessary to create fiscal space for critical development priorities. Currently, Ghana’s tax collection rate falls below that of its peers, although not for all taxes

     

    Consequently, the Country Director for Ghana, Liberia, and Sierra Leone, Robert Taliercio, while speaking at the launch of the report, cautioned Ghana against making a premature return to international capital markets, warning that such a move could undermine the country’s recent economic recovery.

     

    He warned that an early return could send negative signals to investors, leading to a reversal of gains made under Ghana’s debt restructuring efforts and exposing the nation to unsustainable borrowing costs.

     

    His warning follows Ghana’s successful restructuring of both domestic and external debts, which secured significant relief under the US$3 billion International Monetary Fund’s Extended Credit Facility (ECF) programme.

     

    While acknowledging these achievements, Taliercio cautioned against complacency, noting that Ghana has had a history of falling back into unsustainable financial practices when an economic crisis recedes.

     

    “The risk now is falling into complacency with these achievements and returning to a business-as-usual mindset – a recurring error in the past. Ghana has requested a record 17 IMF programs and has been under active IMF supervision for 40 out of its 68 years of independence,” he noted.

     

    He further stressed that rushing back to international markets for dollar funding could be counterproductive, potentially triggering a return to high borrowing costs and renewed financial instability.

     

    Since 2022, Ghana has been locked out of international capital markets due to soaring debt levels, sluggish economic growth, and a weak balance of payments.

     

    While the country is eager to regain investor confidence, the World Bank warns that timing and fiscal discipline will be critical in ensuring long-term economic stability.

     

     

  • Debt Exchange: IPPs threaten to walk away from negotiating table.

     

     

    Adnan Adams Mohammed

    Ghana has been negotiating with the Independent Power Producers (IPPs) since last year to rework the arrears as part of its external debt revamp.

    However, in recent concern raised by the private power producers, they are threatening to walk away from the US$1.6 billion arrears payment negotiation.

    This is huge threat to the success of the efforts made for the past years to restructure the country’s debts.

    “The government has not kept its side of the bargain on payments, despite some producers agreeing to haircuts and others cutting energy charges”, Elikplim Apetorgbor, chief executive officer of Independent Power Generators Ghana, has said in an interview last week. “We were expecting that by now half of the outstanding would be settled and a payment plan prepared for the remainder.”

    “We are compelled to re-evaluate our concessions and may be forced to demand the full settlement of arrears”, he emphasized.

    The government has paid about US$400 million as of the end of December, Apetorgbor said. Part of the deal with the IPPs was for the state-owned power distributor Electricity Company of Ghana to remain current on its payments to them from June 2023 onward. But it was only paying 70% of the monthly bills and cut that to 21% in the last three months, Apetorgbor said.

    However, according to Bloomberg news on the same matter, “a Finance Ministry spokeswoman didn’t immediately respond to requests for comment.”

    Independent power producers

    The country is restructuring almost all of its US$45 billion of debts to make them sustainable under an International Monetary Fund program. This standoff could potentially affect that assessment.

    Ghana won an IMF bailout in 2023 after debt ballooned and it missed a eurobond payment. It concluded a domestic debt rework last year and hopes to soon finalize talks to reorganize US$5.4 billion of loans and US$13 billion of eurobonds.

    The nine member-IPGG produces over 60% of Ghana’s peak demand of 3,618 megawatts and 80% of its thermal generation.

  • OCC to meet on Monday over “cut-off date” for Ghana’s debt restructuring

    Ken Ofori-Atta, Dr Ernest Addison with IMF official

     

    Adnan Adams Mohammed

     

    The Official Creditors Committee (OCC) are meeting on Monday January 8, 2024 to discuss the “cut-off date” for the restructuring of about US$5.4 billion of Ghana’s loans.

     

    A successful completion of the meeting is a key step needed by Ghana to secure its next tranche of funding from the International Monetary Fund. In preparation for the the meeting, the Paris Club of major creditor nations, which does not count China among its permanent members, were scheduled to convene on Friday, January 5, 2024.

     

    The meeting is again expected to focus on an agreement about a “cut-off date” – the date after which new loans from bilateral creditors will not be restructured, the sources with knowledge of the matter said. Defining this date has emerged as a stumbling block for Ghana in its debt rework.

     

    “Ghana is still about cut-off date, but creditors haven’t agreed yet,” a Reuter report quoted sources anonymously. “If the cut-off date is agreed, that means an agreement on debt restructuring is close.”

     

    However, the Reuter reported further indicated that, a spokesperson for the Paris Club declined to comment on meetings that have not yet taken place. Ghana’s finance ministry did not immediately respond to a request for comment.

     

    The bilateral lenders, including the governments of China and France who co-chair the Official Creditor Committee (OCC), hold around a quarter of Ghana’s $20 billion external debt earmarked for restructuring.

     

    Some creditors are said to prefer Dec. 31, 2022, as a cut-off date with Ghana having defaulted earlier that month, according to sources.

     

    However, others pushed for March 24, 2020, because that was when the Group of 20 introduced its debt service suspension initiative (DSSI) to help the world’s poorest countries cope with the fallout of the COVID crisis. Ghana did not participate in the DSSI.

     

    The West African country, which produces gold, cocoa, and oil, needs to come to an agreement on a debt restructuring with its official creditors to secure the IMF executive board’s approval for the next $600 million payout from a $3 billion rescue loan.

     

    This is because the Washington-based lender needs financing assurances that debt relief is being provided by bilateral creditors in accordance with the IMF programme.

     

    Ghana, faced with a deep economic crisis has seen inflation and the government’s debt servicing costs spiral, asked a year ago for a bilateral debt restructuring under the Common Framework, a process set up during the COVID-19 pandemic by the G20 leading economies.

     

    It is also in talks with overseas bondholders to restructure its more than $13 billion in international debt. Holders of the bonds include major global asset managers such as BlackRock, PIMCO, Vontobel, AllianceBernstein and Neuberger Berman.

  • Fitch describes Ghanaian market as weak

    Adnan Adams Mohammed

     

    In the midst of growing uncertainty, Fitch Solutions has described investors’ sentiment towards the Ghanaian market as weak.

     

    The international rating agency noted that foreign Investors remain cautious about uncertainty around Ghana’s debt restructuring processes.

     

    In its latest assessment of Ghana dubbed “Bleak Investment Outlook Dims Ghana’s Short-Term Growth Prospects”, It alluded that the current unfavorable trend towards Ghana’s instrument to the rapid depreciation of the local currency (cedi) since last year, coupled with ongoing uncertainty around Ghana’s external debt restructuring process under the G20 Common Framework, will keep foreign investors cautious.

     

    “Indeed, yields on the country’s Eurobonds traded at an elevated 34.4% (as of July 6), indicating that sentiment towards the Ghanaian market remains weak”, according to the UK-based rating agency, Fitch Solutions.

     

    “Moreover, we project that growth in Ghana’s most salient source markets – including the EU, UK and US – will soften over 2023”, it explained.

     

    Fitch is not in tuned with Ghana’s restrictive monetary conditions, claiming that, such coupling with still-elevated inflation in the markets will dampen appetite for overseas expansions.

     

    These dynamics, it said, inform the view that Foreign Direct Investment inflows into Ghana will fail to return to pre-pandemic levels in 2023, further clouding the short-term outlook for fixed investment.

     

  • Fitch downplays government’s hope on DDEP expected to anchor external debt restructuring

    Adnan Adams Mohammed

     

    Government of Ghana has expressed optimism to secure a successful implementation of an external debt restructuring after successfully completing a Domestic Debt Exchange Programme (DDEP).

     

    The completed DDEP, aimed at alleviating the country’s debt burden in a transparent and efficient manner, would help pave the way for a much-needed external debt restructuring programme.

     

    As government jubilate, Fitch, an international rating agency, is skeptical about the deal’s efficiency, as it has described Ghana’s debt exchange programme as a distressed one. This is  under its criteria, given this material reduction in terms vis-à-vis the original contractual terms, and given that the exchange is needed to avoid a traditional payment default. But, the Minister of Finance is confident that the DDEP will build momentum for the country’s external debt restructuring programme.

     

    “The DDEP, part of the government’s broader fiscal policy to address the country’s current macroeconomic challenges, restore macroeconomic stability and put Ghana on a sustainable path to growth and development, has ended with 85% participation”, Ken Ofori-Atta said when addressing Parliament, last week.

     

    “This success, will also build momentum for the external restructuring programme, which has also commenced.”

     

    He said as part of this process, Ghana has officially asked its bilateral creditors for a Debt Treatment initiative under the G-20 Common framework.

     

    Mr. Ofori-Atta also stated that negotiations had already begun with commercial creditors, with the establishment of a Creditor Committee to assess Ghana’s request for debt treatment under the Common Framework expected by the end of February.

     

    He acknowledged the importance of the DDEP in helping the government meet its debt sustainability target of 55% of debt-to-GDP in present value terms by 2028.

     

    “The Government recognises the continued importance of the DDEP in closing the financing gap and enabling the government to meet the debt sustainability target,” said Ofori-Atta.

     

    With the successful completion of the DDEP, Ghana is hoping to make headway in restructuring its external debt and reducing its debt burden in the long term.

     

     

    Apparently, according Fitch’s sovereign rating criteria, a ‘Rating Default’ rating is consequently assigned to the Long-Term Local Currency Issuer Default Rating.

     

    Among the 67 eligible bonds that could be tendered, six are rated by Fitch. A ‘D’ rating has been assigned to these six bonds.

     

    A GH¢4.2 billion principal payment was due on February 6, 2023.

     

    But in the second amended and restated exchange memorandum released on Feb. 7, authorities announced that eligible holders holding this bond would not receive a final interest payment and a final principal payment, regardless of whether an eligible holder has tendered or not.

     

    But in a press release issued by the Finance Ministry on February 14, 2023, the authorities announced that coupon payments and maturing principals would be honoured “in line with government fiscal commitments.”

     

    This announcement, Fitch, said does not clarify yet when the payment will be made to holders who opted out of the domestic debt exchange. In particular, it does not clarify whether a principal payment will be made before the expiration of the grace period for this specific issue. This security is one of the six issues that have been downgraded to ‘D’.

  • Ghana, Zambia fiscal challenge to persist due to elevated funding costs – RMB

    Ghana, Zambia fiscal challenge to persist due to elevated funding costs – RMB

     

    Rand Merchant Bank is warning of constrained fiscal policy in African countries such as Ghana and Zambia due to elevated costs of funding.

     

    The two countries are presently undertaking debt restructuring to bring their debt levels to sustainable levels.

     

    In its forecast for the year 2023, the South African based research arm of First National Bank, said it expects further reliance by African countries on multilateral and domestic funding to support the various country deficits.

     

    “Fiscal policy will remain constrained across most markets, partly due to elevated costs of funding. Nevertheless, we expect further reliance on multilateral and domestic funding to support the various country deficits”.

     

    “Similarly, the impact of debt sustainability will remain a theme as was seen during the pandemic. Focus in 2023 will be on debt restructuring in markets like Ghana and Zambia, as well as observing vulnerabilities in other markets”, it said.

     

    Growth to remain divergent

     

    Furthermore, Rand Merchant Bank said growth is expected to be divergent and heavily dependent on commodity price movements throughout the year.

     

    “Investment in key sectors such as mining, agriculture, logistics and energy will continue, but within reason given the higher cost of funding and the lacklustre global backdrop”, it added.

     

    Inflation to remain above long-term average

     

    On inflation, it said while it is expected to ease across the continent, it will remain structurally above its long-term average.

     

    “Combined with high interest rates and further shocks that could emanate from the oil market, we are concerned about personal consumption expenditure as real incomes decline given the strain on consumers. We expect most countries to reach the peak of their hiking cycle by the first half of next year (barring further shocks to inflation).”

     

    Meanwhile, Rand Merchant Bank said the Russia-Ukraine war remains the key geopolitical risk.

     

    “We continue to observe the effects of the sanctions against Russia and their disruptive nature on oil prices and on broader supply chains. The current EU ban on Russia’s seaborne crude and the expected ban on imports of refined oil products from Russia in first quarter 2023 are some of the challenges that will add volatility in the energy market’.

     

    “China — Africa’s key trading partner — is expected to gradually recover next year given its commitment to relax the strict covid-19 policies. This move, if sustained, should lead to stronger growth in China’s economy relative to 2022, which could offer some upside risk to commodity prices”, it added.