Ghana has made a cautious but significant return to the domestic bond market, raising GH¢2.7 billion at a 12.5% coupon after years of relying heavily on short-term Treasury bills. While this marks an important milestone in the country’s recovery following the Domestic Debt Exchange Programme (DDEP), it also signals that the journey back to full investor confidence is far from complete.
For some time now, government financing has leaned heavily on short-term instruments, particularly Treasury bills. That approach, though necessary under difficult conditions, comes with risks. Short-term borrowing creates constant refinancing pressure, much like operating on a continuous overdraft. It may offer temporary relief, but it is not a sustainable long-term strategy.
This latest bond issuance suggests a deliberate shift toward more prudent debt management. By extending the maturity profile of its debt, the government is attempting to reduce rollover risks, stabilise the macroeconomic environment, and gradually rebuild investor trust. In principle, this is a step in the right direction.
However, the cost of the bond reveals the market’s lingering concerns. With 364-day Treasury bill rates around 9.77%, the 12.5% coupon indicates that investors are still pricing in Ghana’s medium-term risks. It reflects a cautious re-engagement rather than a full restoration of confidence. Simply put, credibility once lost is expensive to rebuild.
It is also important not to overstate the significance of a single successful issuance. The real test lies in consistency. Can the government continue to access the bond market under varying conditions without facing weak demand or rising borrowing costs? Sustained access, not a one-off success, will determine whether confidence has truly returned.
There are also broader risks to consider. A heavy reliance on domestic borrowing could crowd out private sector credit, limiting access to finance for businesses and potentially slowing economic recovery. While this is not yet a pressing concern, it remains a risk policymakers must monitor closely.
Externally, global developments pose an additional challenge. Rising tensions in the Middle East and the potential disruption of oil supply routes could push global oil prices higher. For Ghana, the implications are direct and significant. Higher oil prices translate into increased fuel costs, which drive inflation and, in turn, push interest rates upward. This raises the cost of borrowing and puts additional pressure on government finances.
Moments like these are the true test of fiscal discipline. There will inevitably be calls for government intervention to cushion households and businesses from rising costs. However, broad subsidies or poorly targeted tax relief could undermine recent gains in fiscal consolidation. A more measured approach—focused on targeted support for the most vulnerable—will be essential.
At the heart of Ghana’s fiscal challenge remains a persistent issue: revenue mobilisation. Weak revenue performance continues to limit fiscal space and sustain reliance on borrowing. Without meaningful improvements in revenue collection, progress on expenditure control alone will not be enough to ensure long-term stability.
Ultimately, the importance of this bond issuance goes beyond the amount raised. It is a signal that Ghana is attempting to rebuild trust with investors after a difficult period. But trust is fragile. It takes time to rebuild and can be lost quickly.
The opportunity now is clear: extend the debt profile, reduce refinancing risks, and steadily restore confidence in government securities. The risk, however, is just as evident. External shocks especially rising oil prices could tempt a return to unsustainable fiscal practices.
Ghana may be back in the bond market, but it remains on probation. The next steps will determine whether this return marks the beginning of lasting stability or a short-lived recovery.
Source: Joe Jackson, CEO, Dalex Finance and Leasing Company PLC
