Ghana has reached a deal to restructure $5.4bn (R98.81bn) of loans with its official creditors, the finance ministry said on Friday, a milestone in the country’s quest for debt relief as it charts its way out of the worst economic crisis in a generation.

The agreement with bilateral lenders including China and France was key to unlocking new International Monetary Fund (IMF) financing and will allow Ghana to access another $600m (R10.98bn) under its $3bn (R54.89bn)  bailout programme.

IMF managing director Kristalina Georgieva welcomed the announcement in a statement, adding the agreement “clears the path for IMF Executive Board consideration” of the first review of Ghana’s programme.

The West African country, which defaulted on most of its overseas debt in December 2022 after debt servicing costs soared, restructured most of its local debt and also needs to reach a deal with private holders of about $13bn (R237.87bn) in international bonds.

“Thank you to our bilateral creditors for their support & cooperation, that has today enabled us to reach agreement with our Official Creditors on comprehensive debt treatment under the G20 Common Framework,” the office of finance minister Ken Ofori-Atta said on X.

The ministry later published a statement saying terms were “expected to be formalised in a memorandum of understanding” which will be dealt with bilaterally with all creditors.

An index tracking Ghana’s bonds had rallied this week, more than recovering the early year losses, partly as the market anticipated an agreement. Spreads in the benchmark index tightened to 2,828 basis points from 2,964 a week ago.

The ministry said the agreement will support ongoing engagements with bondholders and other commercial creditors.

“The Ghana agreement is in line with our expectations that we will see a number of EM countries emerge from default in 2024,” said Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS Asset Management.

“Distressed EM sovereign hard currency debt will continue to be a sector that outperforms this year,” she added. Read More from source