A report to the U.S. State Department stated that the decision is based on the “debt default restriction” under Section 7012 of the FY 2025 State, Foreign Operations, and Related Programs Appropriations Act (SFOAA).
The law prohibits aid to countries that have defaulted on sovereign debt owed to, or guaranteed by, a U.S. person or certain official creditors, and have not yet reached a debt restructuring agreement.
Both the Millennium Challenge Corporation (MCC) and the U.S. Department of State confirmed their compliance with this provision on August 6, 2025.
Two key defaults appear to have triggered Section 7012’s application to Ghana.
The primary issue stems from Ghana’s announcement on December 19, 2022, that it would suspend payments on most of its external public debt, including Eurobonds, commercial term loans, and most bilateral debt. These instruments are widely held by international investors, including U.S. banks, asset managers, and funds.
The second default concerns $251 million in outstanding payments to several U.S. companies, including Twin City Energy, American Tower Company, GSM, Chubb, Kosmos Energy, and Zipline. Some of these obligations, such as those to Twin City Energy and Chubb, are backed by the U.S. government’s Development Finance Corporation (DFC), raising concerns about U.S. taxpayer exposure.
U.S. Senate Foreign Relations Committee Chairman James Risch (R-Idaho) has repeatedly highlighted these arrears, noting that Ghana prioritised payments to Chinese creditors while falling behind on obligations to U.S. firms. He has also urged the U.S. to use its influence with the IMF to block further funding to Ghana.
The outstanding payments are linked to the Government of Ghana or government-controlled entities, most likely the Electricity Company of Ghana (ECG). They are considered political and legal failures of the state and its agencies to honour public commitments, rather than defaults by private companies.
Ghanaian authorities reportedly classify these obligations as part of the $2.6 billion “energy-sector legacy debt” accumulated over time.
