Today, on July 31, 2023, Ghana’s Finance Minister, Ofori-Atta, is set to present the much-anticipated mid-year budget review, originally rescheduled from July 25, 2023. The nation awaits the government’s fiscal roadmap for the rest of the year, focusing on strategies to achieve economic stability and foster growth.
The mid-year budget review comes at a crucial time, as Ghana’s public debt has surged by 20% in just four months. The rise in debt is attributed, in part, to the inclusion of short-term loans from the central bank to the state. As of the end of April, Ghana’s public debt stands at GH¢569.3 billion ($49.7 billion), excluding state-owned enterprises’ obligations.
In response to the escalating debt situation, Ghana has been taking measures to restructure its liabilities to ensure long-term sustainability. Earlier this year, the country defaulted on a Eurobond payment, leading to the initiation of a debt restructuring program worth $3 billion with the International Monetary Fund (IMF). The IMF-approved program aims to make Ghana’s debt more manageable and financially viable.
To address the issue further, Ghana conducted a domestic debt exchange in February, where investors swapped 87.8 billion cedis in obligations for new securities with lower interest rates. This move helped reduce coupon payments on the old notes from an average of 19% to as little as 8.35%.
Moreover, restructuring of $1.5 billion domestic dollar bonds and cocoa bills commenced on July 14, seeking to alleviate the country’s financial burden.
As the mid-year budget is presented, Ghana is actively engaged in discussions with local pension funds to restructure their 29 billion-cedi government bond holdings. Additionally, negotiations with bilateral and Eurobond holders are underway to reorganize existing obligations.
The budget review and fiscal measures are expected to be critical in charting Ghana’s economic course for the rest of the year, tackling the challenges posed by mounting public debt and working towards sustainable economic growth.