The World Bank International Development Association (IDA) has made a guarantee payment of $372 million on behalf of the Government of Ghana for Eurobond 2030.
This comes after the country defaulted on its bond payments on April 14, 2023 due to a debt moratorium announced on December 19, 2022. The payment was made on April 20, 2023. In 2015, Ghana faced difficult market conditions. It has great financial needs, high debt levels that come due early, and no access to international financial markets.
The Ministry of Finance has asked the World Bank for support to achieve these goals and has applied for a policy guarantee in conjunction with a credit from the International Development Association (IDA – the World Bank’s fund for poorest developing countries), in order to be able to mobilize the necessary amount of financing to settle future debt repayments.
Policy-based guarantee, which is an instrument that allows a country to raise capital by minimizing risk to bond investors or commercial lenders in the event of a potential default, has to be ensured. In this case, Ghana has issued a series of $1 billion European bonds maturing in 2030. The 2030 European bonds are backed by IDA guarantees with principal and interest amounts up to 400 million dollars.
Since then, the government has bought back and canceled $70 million in Eurobond 2030 bonds, reducing the amount of collateral to $372 million. Ghana used the proceeds from the 2030 European bond issue to refinance its existing 25 percent debt to a lower yield of 10.75%. In addition, the maturity of existing debt – from 90 days to two years – has increased to an average of 15 years. On December 19, 2022, in the face of significant economic, financial and social pressures, the Ministry of Finance announced the suspension of payment of debt obligations for some of its foreign debts, such as such as European Bonds.
Soon after, the country restructured much of its domestic debt and sought to deal with debt under the common framework of the G20.
