How Ghana can sustain commitment to Domestic Debt Exchange Programme?

Ghana's Deputy Finance Minister, John Kumah, recently highlighted the government's commitment to the success of the Domestic Debt Exchange Programme, following a missed borrowing target in a recent treasury bills auction. The programme, aimed at restructuring the country's debt, has reached a significant milestone with the payment of the first coupons. Yomi Mayomi-Akinola, Head of Research Division at Sarpong Capital, shared insights on the challenges faced and the ongoing process. Over the last 12 to 18 months, Ghana's debt had been accumulating, leading to the need for restructuring due to high coupon rates. The government has taken steps to address this through a phased approach, starting with domestic debt restructuring and moving on to USD denominated bonds and COCO bills. The programme has seen some pushback from investors, especially bondholders, who value transparency and consistency in payment. However, the recent payment of £2.4 billion is seen as a positive step towards restoring confidence. A major concern for analysts is the government's ability to raise enough revenue domestically to meet its obligations. Tax reforms have been implemented, but the burden on citizens is palpable. Finding a balance between revenue generation and public satisfaction is crucial for Ghana's economic stability. The external debt restructuring is a looming challenge for the government, with payments suspended since the start of the year. Creditors are closely monitoring the situation, expecting a fair resolution that aligns with the government's commitments. Ghana's partnership with the IMF has been instrumental in providing financial support and guidance towards fiscal sustainability. Liquidity management and investment in economic growth are key lessons for the government moving forward. Long-term solutions and strategic planning will be vital to reducing debt service to GDP ratio and ensuring currency stability. The outlook for the Ghanaian CD is cautiously optimistic, with expectations of relative stability in the coming months, supported by IMF backing and government interventions. Market forces and foreign currency earnings will play a role in determining the currency's strength, but efforts towards fiscal responsibility are likely to contribute to a more stable economic environment.