After the nation’s agreement to restructure its local currency debt, investment firm Morgan Stanley increased the average “recovery value” for Ghana’s defaulted dollar-denominated government bonds to $46 from a previous projection of $41.
Due to the COVID-19 pandemic, Ghana has been experiencing a severe economic crisis. Recently, the government completed a domestic debt exchange, with 85% of “eligible” bonds participating, or 64% of the 130 billion cedis ($10.8 billion) that was initially intended for restructuring before pension funds were excluded when unions threatened to strike.
Morgan Stanley reduced its “exit yield” prediction for Ghana’s foreign currency bonds from about 15% to 13-14% as a result.
The domestic debt exchange, compared to an earlier prognosis of $7 billion, would save the government, according to the bank, roughly $7.8 billion from 2023 to 2028.
Morgan Stanley continues to have a favorable outlook on Ghana’s hard currency bonds despite the country’s economic difficulties. The bank stated in a research report that was released on Thursday, “We retain our like stance on hard currency bonds.”
The net present value (NPV) loss for domestic bonds, according to the bank, would instead be 51%, as opposed to the average 21% loss experienced by other local debt restructurings over the previous 15 years in nations like Jamaica, Nicaragua, and Cyprus.
Ken Ofori-Atta, Ghana’s finance minister, informed the legislature on Thursday that important talks with foreign bondholders would take place soon.
Ghana holds around $13 billion of international bonds, also referred to as “Eurobonds,” that are denominated in dollars. On Friday, the majority were trading for between 37 and 41 cents on the dollar.
What it implies
Simply put, the dollar-denominated government bonds of Ghana are now worth more, according to the global financial giant Morgan Stanley.
They credit the restructuring of the Ghanaian government’s local currency debt for this choice.
The bank also forecasts that from 2023 to 2028, the restructuring will result in a $7.8 billion savings for the government.