Ghana’s push to re-enter international capital markets following a $15 billion debt restructuring faces mounting skepticism, with top economists warning that a hasty return to Eurobond borrowing risks reigniting the fiscal crisis it seeks to escape.
Professor Peter Quartey, Director of the University of Ghana’s Institute of Statistical, Social and Economic Research (ISSER), has called for restraint as the Mahama administration eyes fresh external debt to plug a widening budget gap, cautioning that reliance on high-cost bonds could unravel hard-won gains from IMF-led reforms.
“Why the rush back to the same markets that burned us?” Quartey asked during a lecture at the Ghana Academy of Arts and Sciences, citing the country’s precarious fiscal trajectory. With the deficit projected to balloon to 5.2% of GDP in 2024—up from 3.2% last year—he argued that tapping pricey Eurobonds would repeat the cycle of “borrow, crisis, restructure” that left Ghana defaulting on $28 billion of debt in 2022. His critique strikes at the heart of a policy divide: while the government views market access as a badge of post-restructuring credibility, critics see it as a perilous shortcut to avoid tougher fiscal choices.
Ghana’s debt overhaul, finalized under a $3 billion IMF bailout, slashed external obligations by 30% and extended bond maturities to 2038. But with interest payments still consuming 47% of revenue and domestic borrowing costs near 25%, officials argue foreign capital is needed to fund infrastructure and curb cedi volatility. Quartey counters that this logic ignores stark lessons. Eurobond yields for sub-Saharan issuers currently exceed 12%, far above pre-default levels, while Ghana’s credit ratings remain deep in junk territory. “We’re essentially asking investors to bet on a patient who just left the ICU,” said Accra-based Financial Journalist Roger A. Agana. “The math doesn’t inspire confidence.”
The debate reflects a regional dilemma. Neighbors like Kenya and Nigeria have also faced investor pushback amid soaring borrowing costs, forcing austerity measures. Quartey advocates instead for ramping up domestic revenue—Ghana’s tax-to-GDP ratio languishes at 13%—and leveraging pension funds and diaspora bonds. But progress is slow: the Ghana Revenue Authority’s 2024 target of GH¢220 billion ($18 billion) hinges on crackdowns that often sputter against evasion and political interference.
For now, the government appears undeterred. Finance Minister Cassiel Ato Forson has hinted at a “phased return” to markets, possibly via diaspora-targeted bonds. Yet with the cedi down 20% this year and inflation stuck above 20%, Quartey’s warning resonates: “Sustainable growth won’t come from digging deeper debt holes. It’s time to build ladders instead.” As Ghana weighs its options, the ghosts of defaults past loom large.
