Signal
Two African sovereign defaults reached the end of their restructuring journey in 2024.
Zambia, in default since November 2020, signed a Memorandum of Understanding with bilateral creditors in October 2023. It then concluded a final agreement with bondholders in March 2024. Ghana, in default since December 2022, completed the restructuring of thirteen billion dollars of Eurobonds in October 2024.
The headline figures are documented. Zambia restructured around three billion dollars of Eurobonds, with a nominal haircut of about 22 percent and a net present value haircut estimated at 50 percent. Ghana’s bondholders accepted a 37 percent nominal haircut. Both processes ran through the G20 Common Framework. Both took years. Zambia waited thirty-eight months between requesting debt treatment and signing its first MoU.
For West African finance ministries operating in the WAEMU regional debt market, these two cases are the most current available evidence on how a sovereign restructuring proceeds today. They deserve close reading. Not for the haircut percentages, but for what they reveal about architecture, choices and costs.
Lecture
The first lesson concerns the domestic debt question.
Ghana included its domestic debt in the perimeter of the restructuring. The Domestic Debt Exchange Programme launched in early 2023 covered banks, pension funds, insurance companies and individual holders of cedi instruments. The political cost was substantial. The strategic gain was decisive. By the time Ghana negotiated with external creditors, domestic stakeholders had already absorbed losses. This neutralised the most contentious question in any restructuring: which creditors share the pain. Bilateral creditors and bondholders were unwilling to grant deep relief while domestic holders stayed whole.
Zambia chose the opposite approach. It left its kwacha-denominated domestic debt untouched, despite significant non-resident holdings. The choice protected the domestic banking system in the short term. It also extended the negotiation timeline. When Zambia reached an agreement in principle with bondholders in November 2023, the Official Creditor Committee rejected it on comparability of treatment grounds. The 2027 Eurobond fell five percent on the rejection news. The kwacha hit a record low. The cost of inter-creditor disputes is borne by the sovereign.
The second lesson concerns the Common Framework architecture itself. The G20 framework, endorsed in November 2020 to coordinate official creditors including China alongside the Paris Club, was designed for cases like these. It has delivered substantive debt relief. It has also operated slowly, with outcomes that depend heavily on the debtor’s pre-existing creditor map. The 2025 G20 Note on lessons learned, published under South African presidency, lists procedural improvements. None of them resolves the fundamental tension between speed and inter-creditor coordination.
The third lesson is technical, and increasingly important for any sovereign approaching restructuring. Ghana and Zambia both issued state-contingent instruments as part of their deals. Zambia’s structure includes a dual trigger linked to the IMF Debt Carrying Capacity assessment and to a three-year moving average of exports and fiscal revenues. If the trigger fires between January 2026 and December 2028, bondholders receive accelerated payments and higher coupons. The instrument is sophisticated. It is also asymmetric. In upside scenarios, bondholders end up granting less relief than bilateral creditors. This complicates the comparability of treatment principle the OCC was meant to enforce.
The fourth lesson is the most relevant for the WAEMU. It concerns what restructuring does to the banking system that holds the sovereign’s debt. Ghana’s domestic exchange transmitted losses directly into the balance sheets of Ghanaian banks, pension funds and insurance companies. Several institutions required recapitalisation. Zambia, by keeping its domestic debt outside the perimeter, avoided that transmission. It also locked in the underlying fragility, since domestic banks remain heavily exposed to a sovereign whose external creditworthiness is still recovering.
Implication
For West African finance ministries, three implications follow.
The first is the need to model the domestic debt scenario before it becomes urgent. Ghana’s DDEP was designed in conditions of acute stress, with limited time for distributional analysis. The treatment of pension funds, insurance reserves and bank holdings became a political question rather than a technical one. WAEMU finance ministries that have not stress-tested their domestic banking system against a sovereign restructuring scenario are working blind. The exercise is not theoretical. The IMF’s 2024 Article IV consultation on common WAEMU policies flagged the bank-sovereign nexus as a primary risk to financial stability.
The second is the value of creditor mapping. Both Zambia and Ghana spent significant negotiation time establishing which creditors held what. Chinese lenders, particularly China Development Bank and the Industrial and Commercial Bank of China, operate with instruments that do not always sit comfortably with Paris Club templates. African Export-Import Bank exposures raised treatment questions in Zambia. The accounting work of cataloguing creditors by counterparty, instrument, collateral and governing law is unglamorous. It is determinative when negotiations begin.
The third concerns the regional debt market. WAEMU member states raised nearly 11,900 billion CFA francs, about 21.6 billion dollars, on the regional market in 2025. Senegal alone placed 2,224 billion CFA, a 123 percent increase year on year. The buyers are predominantly WAEMU banks. The exposure is concentrated. The Common Framework was designed for low-income countries with predominantly external bilateral debt. It is poorly fitted to a regional debt market where the principal creditors are domestic banks holding the paper of multiple member states. The architecture for restructuring within a monetary union has not been written.
Projection
Three points to watch in the months ahead.
The next case under the Common Framework is Ethiopia. Its restructuring remains unfinished. Negotiations with bondholders broke down on the basic question of whether Ethiopia’s situation is a liquidity issue requiring rescheduling, or a solvency issue requiring deeper haircuts. The IMF and bondholders disagree. The outcome will set a precedent that any future African sovereign borrower will reference.
Closer to home, two indicators deserve attention. The first is the trajectory of debt service relative to revenue. The IMF projects Togo’s regional market debt service rising from 4.6 percent of GDP in 2024 to 6.9 percent of GDP in 2026. Senegal’s debt stock has increased substantially after recent data revisions. The second is the depth of the regional market against the volume of issuance planned. Member states intend to raise up to 12,700 billion CFA in 2026. That figure approaches the practical limit of what the regional banking system can absorb without further crowding private sector credit.
The cost of capital for restructured African sovereigns has not normalised. Ghana’s new Eurobonds maturing in 2029 and 2035 carry coupons that reflect a continued risk premium. The market price for re-engagement after default is high, and the experience is paid for in capital costs for years afterward. The relevant question for any West African finance ministry approaching a debt management decision in 2026 is not whether the Common Framework works. It is whether the preparation has been done while the room for choice still exists.