On April 14, 2023, the Government of Ghana defaulted on its coupon payment for the 2030 Eurobond due to the debt moratorium declared on December 19, 2022. However, the International Development Association (IDA) of the World Bank has come to the government’s aid, making a guarantee payment of $372 million on its behalf to cover the Eurobond. The payment was made on April 20, 2023.
In 2015, the Ghanaian government requested a policy-based guarantee and a credit from the IDA to raise the necessary funds to repay upcoming debt, given the country’s challenging market conditions, high debt levels maturing soon, and lack of access to international financial markets. The IDA provided a policy-based guarantee, which allowed Ghana to issue a $1 billion Eurobond series due in 2030. The guarantee covered up to $400 million in both principal and interest, and Ghana utilized the proceeds to refinance its existing debt.
The funds raised through the Eurobond issuance enabled Ghana to refinance its existing debt at a lower interest rate of 10.75% and extend the maturity of its debt to an average of 15 years, up from 90 days to two years. However, due to significant economic, financial, and social pressures, the Ministry of Finance declared a moratorium on certain categories of its external debt, including Eurobonds, on December 19, 2022. Subsequently, the majority of its domestic debt was restructured, and debt treatment under the G20 Common Framework was requested.
The guarantee payment by the IDA has come as a relief to the Ghanaian government, which has been facing mounting debt pressures in recent times. The government has indicated its commitment to addressing the debt situation and restoring macroeconomic stability in the country. The World Bank has also pledged its continued support for Ghana’s development efforts and has called for increased efforts to improve fiscal sustainability, promote private sector growth, and enhance social protection systems.