Ghana settles bondholders under re-opened debt swap

Ghana's Ministry of Finance recently settled eligible bondholders who participated in the re-opened domestic debt exchange after receiving a tender of about 4 billion cedis at the close of the program last week. Benjamin Boachie, Chief Economist at SecondStax, provided valuable insights and analysis on the debt restructuring program and the current state of the Ghanaian economy. The re-opened domestic debt exchange program was an administrative re-opening to address legacy debt that had not been tendered in the previous round of exchanges. The government successfully restructured about 3.9 billion cedis worth of bonds through this program. Boachie emphasized the importance of finding debt relief to stabilize the fiscal policy, especially with Ghana being locked out of the international capital markets for the foreseeable future. The IMF deal, which provides $3 billion in financing, is contingent upon successful debt restructuring, making it crucial for the government to aggressively pursue debt relief options. Boachie highlighted the government's need to focus on long-term structural positioning within the global financial architecture to ensure fiscal stability in the future. The IMF's upcoming assessment is expected to be positive, but Boachie stressed the importance of not solely relying on the IMF deal for economic stability. In the short term, the successful reopening of the domestic program will be a significant aspect for Ghana's engagement with the IMF. The Ghanaian currency, the cedi, has experienced stability in the short to medium term, but long-term structural reforms are essential to maintain its stability and effectiveness. Boachie noted that multilateral discussions with institutions like the IMF, World Bank, and UN will have a significant impact on the currency's long-term stability. Discussions on fiscal and structural reforms need to consider the limited tools available to the Central Bank and the comprehensive focus required by the IMF deal. Boachie highlighted the importance of finding a balance between protecting the vulnerable and imposing capital restraints to ensure economic stability. Inflationary trajectory and interest rates are crucial factors for the Bank of Ghana to consider. With inflation at around 40%, Boachie recommended maintaining an upward trajectory of interest rates to address the economic drag caused by high inflation. Looking ahead to Ghana's upcoming election, investors' confidence is on edge, and stability in the last quarter of the year will be essential. As Ghana navigates its economic challenges, finding a balance between short-term measures and long-term structural reforms will be key to ensuring economic stability and currency viability.