Ghana to resume coupon, principal payment of old bonds

Ghana's finance ministry has announced its plans to resume payment of coupons and principals of old bonds on the 13th of this month, following the completion of the country's domestic debt exchange program. This move has sparked mixed reactions from investors in the local market in Ghana, with concerns over valuation, tradability, and liquidity of the instruments going forward. Kweku Ako-Kumson, an economic analyst at Data Bank, shared insights on these developments and the outlook for the Ghanaian economy. As the conclusion of the domestic debt exchange program reshaped the bond market landscape in Ghana, investors have been closely monitoring the impact of the reclassification of outstanding principals and the conversion of bonds into Tradable Discount Obligations (TDOs). Ako-Kumson highlighted the market's need for clarity on these treatments and expressed concerns about the uncertainty surrounding the valuation of bonds with payment-in-kind components affecting their value. The post-exchange trading activity revealed a challenging market environment with limited bids and offers, indicating a lack of confidence and liquidity among investors. The success of an International Monetary Fund (IMF) deal is anticipated to restore stability and boost investor confidence in the domestic market. Ako-Kumson emphasized the positive sentiments expected with an IMF agreement and cited S&P's bond rating upgrade for Ghana following the debt exchange program's completion. Despite the potential positive impact of an IMF deal, Ghana's economy continues to grapple with multiple challenges, including soaring inflation rates and exchange rate volatility. Ako-Kumson warned that high inflation levels and currency depreciation could hinder consumer demand and increase cost pressures on the manufacturing and industrial sectors. Looking ahead, the economic outlook for Ghana appears subdued, with growth projections ranging from 2.5% to 3.5%. The implementation of revenue mobilization measures, such as an increase in value-added tax, is expected to further dampen growth prospects, particularly in the trade and hospitality sectors. Amid these economic headwinds, concerns about potential social unrest and street protests have emerged. Ako-Kumson acknowledged the challenging conditions faced by the Ghanaian population but expressed skepticism about the effectiveness of protests in addressing systemic issues. He emphasized the need for dialogue and consultation to navigate through the current difficulties and secure the IMF deal for long-term stability. In conclusion, while Ghana's financial landscape undergoes significant transformations with the debt exchange program and potential IMF agreement, the country's economy faces a complex set of challenges that require careful navigation and proactive measures to sustain growth and stability in the midst of uncertainty and adversity.