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Investors are Paying for Ghana’s Expensive Ventures

Last week, Ghana made the tough choice of asking its local bondholders to accept losses on interest payments. It made this decision through a debt swap, aiming to restructure its debt as part of requirements to qualify for an IMF loan. According to Ken Ofori-Atta, Ghana’s Finance Minister, the country will replace existing local-currency debt with four new bonds maturing in 2027, 2029, 2032 and 2037. Runaway inflation and rising interest rates have been causing worries for Ghana’s investors. And now that Ghana needs to save its economy, investors are taking the fall. This is not Ghana’s first time in debt distress. In 2000, it had borrowed so much that it enrolled on the Heavily Indebted Poor Countries initiative of the International Monetary Fund and the World Bank. As of 2006, when the initiative ended, Ghana’s total public debt stock was US$780 million (25% of GDP). After that, Ghana started becoming popular among investors. Its fame grew even faster after 2010 when it began exporting oil.