Debt restructuring programmes in Ghana and Zambia are going in “diverging directions” due to Zambia’s larger exposure to Chinese lenders and its weaker ability to cope with a large amount of debt, investment bank Citi said on Friday.

Ghana was likely to get an International Monetary Fund (IMF)board sign-off for a $3 billion rescue loan in the next few weeks, while Zambia’s restructuring had stalled, Citi’s analysts said in a note to clients.

Ghana defaulted on its external debts in December and has since sealed a domestic debt swap and requested a restructuring of its bilateral debts via the G20’s Common Framework vehicle.

Zambia meanwhile has been stuck in default since it became the first COVID-era African nation to do so in November 2020. Its finance minister has said it is pushing to finish the long-delayed Common Framework restructuring by end of March or shortly after.

“Our more positive view (on Ghana) is supported by a strong commitment by the IMF and Paris Club to achieve a quick breakthrough,” the Citi note said.

It estimated that Ghana’s international sovereign bonds would need an average coupon reduction of 30%-50% and five-year maturity extension, with no cut in the principal value, to cover the country’s forecasted $4.5 billion financing gap in the next three years.

“Assuming a 12.5% exit yield… suggests an average price uptick of 10 cents” on bond prices, the note said.

It said there was little upside to bond prices in Zambia now, even with a “conservative” estimate of a 25% principal haircut, 30% coupon cut, average maturity extension of six years and a three-year grace period.

“The Zambian restructuring will require high-level compromises at multilateral (IMF) and bilateral (China vs G7) level.”

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