Ghana’s agreement to restructure its $750 million loan with Afreximbank has received backing from official creditors, a source told Reuters, a development that implies the bank may have absorbed losses on the loan.
A source familiar with the Paris Club’s position said Ghana’s deal with Afreximbank “is welcome” from the Club’s perspective, an endorsement that would only be possible if the arrangement met official creditors’ conditions.
Previously, sources close to the Paris Club of wealthy-nation lenders told Reuters they had made it clear that Ghana’s Afreximbank loan needed to be restructured before the Club would give its approval.
With this backing now in place, the agreement removes Ghana’s final major obstacle in its debt restructuring process.
However, it also raises questions about Afreximbank’s credit rating and its long-standing claim to “preferred creditor status,” which would normally shield it from taking losses on its loans.
Afreximbank, formally known as the African Export & Import Bank, referred Reuters to an earlier statement in which it said it had resolved the “issues” surrounding the loan to “the satisfaction of both parties.”
The bank did not say whether it accepted losses on the deal. Such losses could have consequences for Afreximbank, as ratings agencies may downgrade its credit rating, increasing its borrowing costs.
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For the Paris Club to welcome the deal, it would need to comply with the principle of “comparability of treatment.”
This could have been achieved through a reduction in the loan’s principal, an extension of its maturity, a cut in the interest rate, or a combination of these measures.
Ghana announced the agreement on Christmas Day but has not released any details of the terms and did not immediately comment on the Paris Club’s position.
Last year, sources told Reuters that the Paris Club viewed loans taken by Ghana and Zambia from two so-called “baby multilateral” lenders, the Eastern and Southern African Trade and Development Bank (TDB) and Afreximbank, as commercial debt, meaning they should be restructured.
Ghana defaulted on its external debt in late 2022, while Zambia defaulted in 2020.
Both countries later informed Afreximbank that the loans would need to be restructured.
Despite this, Afreximbank has publicly maintained that, under its charter, it holds preferred creditor status and would not take losses.
The situation surrounding Zambia’s debt to Afreximbank remains uncertain.
In October, Zambia’s treasury secretary said that “a third party had expressed interest” in taking over the country’s debt to the bank.
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Image Credit: The Sudan Times
