American financier, JP Morgan has said Ghana’s domestic and external debt restructuring may be prolonged despite reaching a staff-level agreement with the International Monetary Fund (IMF) for a US$3bn, 3-year Extended Credit Facility (ECF).

He believes the restructuring process is likely to be protracted due to the initial terms which may not be viewed favourably by locals.

“As such, delays on the domestic front could delay the commencement of the external debt operation,” JP Morgan noted in an Africa Emerging Markets Research conducted on the West African nation.

Ghanaian authorities have proposed a voluntary domestic debt restructuring plan aimed at dealing with the elevated debt burden with an external debt restructuring plan to follow in due course.

Eligible domestic bonds of about GH¢137 billion will be split into 4 new amortizing bonds maturing in 2027 (17%), 2029 (17%), 2032 (25%) and 2037 (41%), paying equal step-up coupons of 0% in 2023, 5% in 2024 and 10% from 2025 onwards.

But JP Morgan observes the initial uptake of the debt exchange offer could be limited to central bank and domestic banks “given significant losses to holders, which we estimate at around 50% in NPV.”

Authorities have not made an official proposal on external debt, but the initial offer according to media reports suggest a 30% haircut and 3-year coupon moratorium.

Debt service relief from domestic and external debt restructuring, along with stronger fiscal consolidation efforts will assist the government in bringing debt on a sustainable path by 2028.