Ghana is likely to return to the domestic bond market in 2025, three years after its debt restructuring, as improving macro-economic indicators such as falling inflation create favourable conditions for market re-entry.
The timing aligns with the typical two to four years’ normalisation period markets require post-debt restructuring.
Responding to a question on how soon the government intends to reassess the domestic bond market post the domestic debt restructuring at the end of IMF/World Bank annual meetings press briefing by the Ministry of Finance, the Director, Treasury and Debt Management at the Ministry of Finance, Dr Samuel Arkhurst, said normally, when restructuring occurs, return to market takes between two to four years.
“So, when you look at when we did our restructuring, it’s almost close to the two-year window that we are looking at,” he stated.
The last time the government issued a bond was in September 2022, and right after that, it launched the domestic debt exchange programme in January 2023.
The programme, which was completed in September 2023, saw the government swap local bonds worth over GH₵83 billion for 12 new ones at reduced coupon rates and longer tenors.
“In 2022, inflation was 54 per cent. So if you issue any bond, looking at the real rate, the coupon rate will be somewhere around 60%. However, now that we have halved inflation and are moving into the third year, you should be seeing a normalisation that creates an opportunity for the domestic bond market to be opened.
“Next year will be a better time to go back to the domestic bond market,” Dr Arkhurst stated.
Positive results
Also speaking at the briefing, the Minister of Finance, Dr Mohammed Amin Adam, said the government’s efforts to restore macro-economic stability and economic recovery was yielding positive results.
He said the pace at which the economy has rebounded in the last 10 months has been phenomenal. “We have seen improved investor confidence, growth has rebounded strongly and the macro-economic environment has stabilised.
“We want to work to bring the stability to the levels that will be visible and improve the living conditions of the people of Ghana,” he stated.
He noted that the 2024 half-year growth rate of 5.8% was the highest in the past five years, which signals that GDP growth was gradually returning to pre pandemic levels.
The Minister also pointed out that the observed trend in the country’s growth trajectory clearly indicates that GDP growth in 2024 would exceed the revised target of 3.1% in the mid-year budget and also exceed the projected upward revised outlook of 4% by the IMF. Our growth as projected is more than the global growth projection of 3.2%
Fiscal consolidation
Dr Amin Adam said the government has also made significant progress in the fiscal consolidation process, highlighting that the country has improved the primary balance on commitment basis from a deficit of 4.3% of GDP by the end of 2022 to a deficit of 0.3% of GDP in 2023.
“We are on course to improve the primary balance to a modest surplus of 0.5% of GDP by end of 2024, and this is despite 2024 being an election year,” he said.
He also assured the investor community of the government’s continued commitment to fiscal discipline despite 2024 being an election year.
“For every meeting I have attended, people have been concerned about fiscal performance in an election year because of our history of fiscal slippages in election years. However, so far, from the data we have seen, we will change the narrative; it’s not going to be the same in this election year.
“This election will not derail our fiscal path; we are determined to achieve the fiscal targets for the year,” he assured.
Debt restructuring
The Minister also mentioned that the country’s external commercial debt restructuring has been very successful. After successfully completing the restructuring of GH₵202 billion domestic debt in 2023, the government secured a Memorandum of Understanding with its bilateral creditors in June 2024 to restructure its $5.1 billion debt.
Quite recently, the government achieved an overwhelming success with its Eurobond restructuring, with over 98% of bondholders giving their consent to the government to amend the original terms of its $13.1 billion debt.
The new terms will see holders take a 37% haircut on their investments and a suspension of coupon payments until 2026.
Dr Amin Adam said the country has now restructured over 93% of its eligible external debt, marking a significant milestone in its debt sustainability efforts.
Challenges
The Minister added that despite improvements in the economy, there were still some challenges, noting that the country’s major challenge, which continues to impede growth and stability, is the financing challenges in the energy sector.
“We need to resolve this because it has contingent effects on our fiscals and economy,” he said. He said the government was currently implementing a number of measures to address the issues, with the signing of $250 million loan agreement with the World bank expected to support the procurement of smart meters as part of measures to improve revenue collection by the Electricity Company of Ghana (ECG).
“We are also working together with ECG and the Ministry of Energy to ensure that the Cash Waterfall Mechanism is operated in a more transparent manner, with all eligible collections by ECG deposited into the system for redistribution to all other stakeholders in the value chain.
“We will also undertake an audit of the single collection account of the system for the last quarter of 2023 and the first and second quarters of 2024, with the view of promoting transparency and correcting any anomaly,” he stated
