Ghana Exits Eurobond Default as Zambia Leads Africa Debt Crisis Rebound

Macro · Africa

Africa’s debt crisis has moved from default headlines to a fragmented solvency map. Ghana and Zambia have rewritten their Eurobond contracts, while Kenya, Egypt, Nigeria and Ethiopia now face their own walls of maturities and IMF conditions.

Ghana’s Eurobond Exchange Resets the Benchmark

Ghana launched its Eurobond consent solicitation and exchange offer on 5 September 2024. By 3 October 2024, the government had secured over 98 percent bondholder consent, far above the 65 percent threshold.

Reuters reported that more than 90 percent of bondholders endorsed the restructuring of US$13 billion in international debt. The transaction officially closed on 9 October 2024, retiring US$13.1 billion of old bonds.

The exchange reduced the Eurobond debt stock by approximately US$3.868 billion. Ghana also made US$475.6 million in payments associated with the restructuring, including the first post-restructuring debt service repayment in October 2024.

Ghana’s Ministry of Finance reported that the average coupon rate on bonded debt fell from over 8 percent to below 5 percent after the exchange. The outstanding Eurobond balance after restructuring stood at US$9.236 billion.

For bond investors, the deal created two distinct instruments rather than a single recovery class. That split between the PAR and DISCO options defines Ghana’s post-default yield curve and its future refinancing risk.

PAR and DISCO Options Show Investor Burden-Sharing

The Eurobond exchange offered bondholders two main options. The PAR option carried no nominal haircut on principal, with a coupon around 1.5 percent and new bonds maturing in 2037.

The PAR option was capped at US$1.6 billion. The DISCO option imposed a nominal haircut of 37 percent on all claims, including post-default interest.

DISCO bonds mature between 2029 and 2035, with coupon rates of 5 to 6 percent rising after 2028. Some 91 percent of participating holders chose the discount option and received those bonds.

The 37 percent nominal haircut, worth about US$5 billion, applied to that discount option rather than to the whole Eurobond stock. Fitch Ratings estimated the deal would cut foreign-currency debt stock by about 8 percent of projected 2024 GDP if the PAR cap was fully used.

Fitch also projected interest payment reductions equivalent to 1.1 percent of GDP in 2024, 0.8 percent in 2025 and 0.6 percent in 2026. Those savings translate to 7 percent, 5 percent and 4 percent of revenue and grants over the same period.

Domestic Debt Exchange Completed Before Eurobond Deal

Ghana announced its Domestic Debt Exchange Program on 5 December 2022, targeting local-currency bonds maturing between 2023 and 2039. The programme exchanged old bonds into twelve new benchmark bonds maturing annually from 2027 to 2038.

The first phase was completed in February 2023 for medium and long-term domestic bonds. A second phase in late 2023 brought in Cocobills, US dollar-denominated domestic debt and pension fund holdings.

IMF estimates indicate the domestic exchange generated about US$8 billion of debt-service savings over 2023 to 2026. The present value of public debt-to-GDP is expected to be 9 percentage points lower by 2028 because of domestic restructuring.

A 2023 IMF report found an average net present value reduction of about 30 percent for domestic bondholders at 16 to 18 percent discount rates. Roughly 85 to 90 percent of marketable public domestic debt was exchanged, excluding treasury bills and most pension funds initially.

Treasury bills, about 15 percent of banks’ holdings of government securities, were excluded from the exchange. That exclusion protected short-term liquidity for local banks while concentrating losses on longer-dated bondholders.

Official Creditors and the G20 Common Framework

Ghana applied the G20 Common Framework for Debt Treatments, forming an Official Creditor Committee that included Paris Club members and China. The bilateral debt treatment provides full debt-service relief over the program period for claims committed before December 2022.

Rescheduled payments are capitalised and repaid in years 16 to 17 after the original due dates. Reuters reported that Ghana reached a preliminary agreement in January 2024 to restructure US$5.4 billion owed to official creditors, including China.

The Center for Global Development documented the formalisation process, with an agreement in principle in January 2024 and a subsequent memorandum of understanding among Official Creditor Committee members. The memorandum aimed to finalise comparability of treatment across creditors.

For private bondholders, the official creditor treatment matters because it sets the baseline for comparability. A creditor that accepts less than the official sector risks political backlash, while one that demands more can delay the entire restructuring.

Ghana’s US$3 billion IMF Extended Credit Facility, approved in May 2023, anchors the program. IMF limits on new external borrowing stand at a present value of US$231.5 million in 2024 and US$50 million in 2025.

Zambia Emerges as the First Full Common Framework Test

Zambia completed its Eurobond exchange on 11 June 2024. The IMF notes that debt service on restructured instruments resumed after that date, making Zambia the first country to complete a full Common Framework restructuring.

Zambia’s path matters because it tested whether official creditors, private bondholders and the IMF could coordinate on actual payment terms. The June 2024 completion ended a process that began with Zambia’s default in 2020.

The Zambia deal provides a benchmark for other African sovereigns still negotiating with China and the Paris Club. Its completion contrasts with Ghana’s later start and faster Eurobond exchange, offering two different sequencing models.

For bond investors, Zambia’s post-restructuring instruments now trade as performing assets. The question is whether the new debt stock is sustainable given copper prices, fiscal discipline and the IMF program conditions.

Zambia’s social spending targets under the IMF program are being monitored alongside debt service. The trade-off between external repayments and health or education budgets remains a core test of the restructuring’s legitimacy.

Kenya Faces the 2026 Maturity Wall

Kenya enters 2026 with a heavy Eurobond maturity calendar inherited from its 2014 debut issuance. Unlike Ghana and Zambia, Kenya has avoided a formal default or Eurobond exchange.

Kenya’s debt service burden has been rising as a share of revenue, leaving less room for recurrent spending on health and education. The government has relied on IMF programmes and new borrowing to manage refinancing needs.

Investors watch Kenya’s access to international capital markets and its ability to roll over maturing bonds. A failed auction or forced buyback would signal that the frontier market rally is fading.

Kenya’s path contrasts with Ghana’s decision to impose haircuts. Kenya has sought to preserve market access through regular coupon payments and partial liability management operations.

The 2026 wall for Kenya is not a single event but a sequence of maturities and coupon payments. Each successful rollover reduces near-term default risk but extends the debt overhang further into the next decade.

Egypt’s External Debt and IMF Programme

Egypt carries one of Africa’s largest external debt stocks, driven by Eurobonds, multilateral loans and Gulf deposits. The Egyptian pound’s devaluations have increased the local currency cost of servicing that debt.

Egypt’s IMF programme includes a large financing envelope aimed at stabilising the external account. The programme conditions include exchange rate flexibility, subsidy reforms and asset sales to reduce debt.

Bond investors face a different risk profile in Egypt than in Ghana or Zambia. Egypt has maintained coupon payments while negotiating a longer-term debt sustainability framework with the IMF.

The social spending dimension is acute in Egypt, where subsidy cuts for fuel and food affect a population of more than 100 million. Debt service competes directly with those subsidies and with health and education budgets.

Egypt’s ability to attract Gulf deposits and investment is a key variable for 2026. Without continued external support, the debt wall becomes a solvency question rather than a liquidity one.

Nigeria’s Eurobond Burden and Fiscal Space

Nigeria faces significant Eurobond maturities alongside its domestic debt service, which absorbs a large share of federal revenue. The naira’s depreciation has raised the local cost of external repayments.

Nigeria’s fiscal space is constrained by fuel subsidy costs and low oil production relative to potential. The government has sought IMF advice but has not entered a full adjustment programme like Ghana or Egypt.

Bond investors view Nigeria’s risk through the lens of oil prices, naira stability and the government’s willingness to cut subsidies. The 2026 maturity schedule tests whether Nigeria can refinance without an IMF anchor.

Health and education spending in Nigeria remains low as a share of GDP compared with debt service. The trade-off is central to the political economy of any future restructuring debate.

Nigeria’s path is distinct from the Common Framework cases because no formal default has occurred. The question is whether market access can be maintained as maturities approach without a structural fiscal adjustment.

Ethiopia’s Debt Restructuring and Paris Club Role

Ethiopia reached an agreement in principle with its official creditors under the Common Framework, including China and Paris Club members. The country’s civil conflict had delayed implementation of the IMF programme and debt talks.

Ethiopia’s Eurobond obligations are smaller than Ghana’s or Nigeria’s, but the country’s debt crisis is deepened by state-owned enterprise borrowing and domestic debt. The restructuring perimeter extends beyond the single Eurobond.

China’s role in Ethiopia is central because of infrastructure loans tied to railway and industrial projects. The Paris Club and China must agree on comparability of treatment before private creditors finalise terms.

For investors, Ethiopia illustrates the slow pace of Common Framework cases when official creditors disagree. Delays increase the uncertainty around recovery values on private claims.

Ethiopia’s post-conflict rebuilding needs compete with debt service obligations. Any final restructuring must balance official creditor recoveries against the government’s ability to fund health, education and reconstruction.

China and the Paris Club Burden-Sharing

China participates in the Ghana and Ethiopia Official Creditor Committees alongside Paris Club members. Chinese lending to African governments is often opaque, with state-owned policy banks holding bilateral claims.

The Paris Club framework requires comparable treatment of private creditors, but China’s claims are sometimes structured as commercial loans rather than official development assistance. That ambiguity complicates the comparability analysis.

In Ghana, the US$5.4 billion official creditor treatment includes Chinese claims, with repayments capitalised and deferred for 16 to 17 years. China accepted the same broad terms as Paris Club members in that case.

For bond investors, the China-Paris Club relationship determines how much debt relief falls on official creditors versus private bondholders. A larger official creditor share reduces the haircut needed from private investors.

The burden-sharing question is not settled across the continent. Each Common Framework case renegotiates the split between China, the Paris Club, multilaterals and private creditors, creating uncertainty for future bond issuances.

Debt Service Versus Health and Education Spending

Ghana’s restructuring generated US$4.3 billion to US$4.4 billion in debt-service savings during the IMF programme period. Those savings create fiscal space that could be redirected to social spending.

The IMF programmes for Ghana and Zambia include social spending floors designed to protect health and education budgets. The floors are monitored in programme reviews alongside debt targets.

Kenya and Nigeria have not imposed Eurobond haircuts, meaning debt service continues to crowd out social spending. Nigeria’s health and education spending remains low as a share of GDP relative to debt service.

The capitalised official creditor repayments in Ghana and Zambia do not disappear; they are deferred for 16 to 17 years. That means future governments will face renewed debt service just as the current relief expires.

For foreign investors, the social spending trade-off affects political stability and long-term growth. A country that cannot fund health and education is more likely to face unrest that undermines bond performance.

What the 2026 Debt Wall Means for Bond Investors

Ghana’s Fitch rating remained at Restricted Default as of 24 July 2024, reflecting the ongoing status of the exchange settlement. The post-exchange instruments are now the reference for recovery values.

Investors in Ghana’s new DISCO bonds receive coupons of 5 to 6 percent rising after 2028, while PAR bondholders get 1.5 percent with a longer 2037 maturity. The yield curve reflects different risk appetites for near-term coupons versus principal preservation.

Zambia’s June 2024 Eurobond completion removes one default overhang but leaves a smaller, restructured debt stock. Copper prices and IMF programme compliance determine whether Zambia can service those new bonds.

Kenya, Egypt, Nigeria and Ethiopia each face 2026 maturity events without a uniform restructuring template. Investors must distinguish between liquidity squeezes that can be resolved with new money and solvency crises requiring haircuts.

The Africa debt crisis has become a map of sequential tests rather than a single default wave. Ghana and Zambia offer recovery benchmarks, while the unresolved cases carry the highest risk-adjusted spreads.