Finance Minister, Ken Ofori-Atta
• Ghana’s debt trajectory has shown be worrying
• The nation has recorded a debt stock of GH¢336 billion with a debt-to-GDP ratio of 76.4%
• Finance Minister, Ken Ofori-Atta is expected to present the 2022 budget in November
Ghana is likely to return to the International Monetary Fund (IMF) for financial assistance should the increasing public debt stock persist, an Economist and Fixed Income Strategist has cautioned.
At the moment, the country’s public debt stock stands at around GH¢336 billion ending July 2021. An figure that could hamper economic growth and recovery efforts.
As a result of this, Neville Mandimika who is a Johannesburg-based Economist and Fixed Income Strategist at FirstRand Bank believes Ghana, “At this point needs to present a credible plan B on how they fund the budget in the absence of Eurobond issuance adding, do they still have access to the Eurobond market at these levels? Could they issue one at a reasonable price? The answer seems to be no.”
“In a worst-case scenario where debt is growing amid a global risk-off mood, Ghana may have to head back to the IMF,” the economist is quoted in a Bloomberg Survey.
The Bloomberg survey also showed that Ghana is likely to pay a higher premium should it return the issue more Eurobonds on the international capital market in 2022.
Though Ghana has often relied on Eurobond issuance to fund government expenditure, the nation’s credit-risk premium has risen to the highest since the onset of the coronavirus pandemic.
In addition, the Bloomberg survey pointed that limited access to loans from foreign entities may force the Government of Ghana to supply debt domestically. A decision that could also hamper gains made by the local currency, the cedi.
Per a Bloomberg Index conducted in October 2021, Ghana’s US dollar bonds was the worst-performing instrument. The index which tracked the emerging-market hard-currency debt recorded a decline of 5.8 percent.