Ghana’s debt restructuring plans are set to test a $400 million World Bank guarantee which was designed to provide extra security if the West African country failed to pay.

Like other smaller, riskier emerging market countries including Sri Lanka and Zambia, Ghana faces a debt overhaul after its already strained finances buckled under the economic fallout from COVID-19 and Russia’s invasion of Ukraine.

While Ghana’s troubles came as no surprise to investors — its overseas bonds have tumbled to a third of face value and the cedi suffered the world’s worst currency plunge this year — the way the World Bank guarantee will work out is not clear.

Legal experts and investors are now scouring the contract of the $1 billion bond involved, which is due to mature in 2030 and has a guarantee equivalent to interest payments due in the next four years, to figure out Ghana’s options.

Ghana’s Ministry of Finance did not reply to a request for comment on its plans.

“If Ghana decides to use the guarantee, it has to pay back immediately to the World Bank,” Mitu Gulati, a law professor at the University of Virginia and debt restructuring expert, said.

“And it’s hard to do so if its debt is unsustainable.”

The World Bank said at the time it was issued that the so-called credit enhanced bond was designed to allow Ghana to sell bonds in 2015 under “challenging market conditions”.