The government will need between $600 million and $800 million for external debt servicing this year, with approximately $477 million allocated for Eurobond debt service.
IC Africa Research revealed that the estimated cash flow for the restructured Eurobonds envisages the resumption of debt service on these bonds starting in July 2024.
It further explained that, accounting for the ongoing multilateral debt service (given that these debts were outside the perimeter of debt restructuring), the government will need between $600 million and $800 million for external debt service in 2024.
The research firm also noted that these estimates exclude the $1.6 billion legacy arrears owed to the Independent Power Producers, of which only $400 million has been paid, and other commercial creditors.
Looking ahead, IC Africa Research highlighted that the cash flow forecast indicates intensified debt service obligations from 2026 to 2030, peaking at $1.4 billion and then dropping to $1.1 billion for Eurobonds alone.
As of April 2024, Ghana’s forex reserves (excluding oil funds and encumbered assets) stood at $4.3 billion, covering two months of imports.
IC Africa Research emphasized its view that the government has been accumulating reserves in anticipation of resuming external debt service, rather than sufficiently supporting the foreign exchange market.
Consequently, the firm remains less optimistic about the outlook for the Ghanaian cedi, citing limited sources of sizable foreign exchange inflow to the market.
Following the significant move in restructuring the Eurobonds, IC Africa Research added that it anticipates limited upside for secondary market pricing due to the deeper haircut and reduced coupon.
“Following our early May 2024 update note on the initial proposal, in which we anticipated an upside of between 10.0% and 20.0%, Ghanaian Eurobonds have posted an average price gain of 3.8% as of mid-day June 24, 2024.
However, we believe that the new terms impose deeper losses on investors via the effective haircuts on principal and PDI, as well as the 50 basis points reduction in the stepped-up coupon rate (6.0%), while the lower coupon of 5.0% is extended for one extra year,” the report stated.
“In view of this, we now see limited upside scope from the current average market cash price of $53.4 per $100 face value, with an upside potential of between 5% and 7.0%.”
