By Toma Imirhe
Ghana is preparing to re-enter the domestic bond market for the first time since its 2022 debt default, aiming to take advantage of falling borrowing costs and signs of economic stabilization. The move comes as short-term interest rates have dropped to their lowest point in three years, signaling renewed investor confidence and easing financial conditions.
According to a source within the Ministry of Finance, the government intends to raise GHc3 billion (about US$291 million) through medium-term bonds between September and December 2025. The primary goal of the fundraising is to replace costly short-term treasury bills with potentially cheaper, longer-term debt. The official, who spoke on condition of anonymity due to the sensitivity of the matter, claimed that full details will be revealed in the mid-year budget review scheduled for later this month.
This anticipated issuance would mark Ghana’s return to the domestic debt market following a default triggered by unsustainable levels of borrowing under the country’s previous government. That financial crisis effectively shut Ghana out of both local and international credit markets.as it engaged on a comprehensive restructuring of both its domestic and foreign debt.
Although Finance Minister Dr Ato Cassiel Forson did not specifically announce a return to the domestic bond market as a source of financing the projected 3.5% fiscal deficit for 2025 in his budget statement, he has hinted at an eventual return to the domestic bond market, a strategy confirmed by President John Dramani Mahama himself – but no specific timelines had been given.
Cedi denominated domestic debt was restructured through a controversial Domestic Debt Restructuring Programme (DDEP) in 2023 which exchanged some GHc137 billion in already issued medium and long term bonds – including ESLA and Daakye bonds – for new ones with longer maturities and lower coupon rates. Despite widespread investor protests, especially from local bondholders, government stuck to its guns in order to meet the International Monetary Fund’s debt sustainability threshold and thus qualify for a US$3 billion financial bail-out spread over three years, which is still ongoing.
Although government said the exchange was voluntary, fears of further defaults on servicing of unconverted bonds persuaded investors to exchange over 80% of their holdings under the programme, effectively killing off investor interest in any new issuances.
But since taking office in December, the President Mahama administration – elected on a promise to restore economic order- has significantly reduced government borrowing, often rejecting bids for its short term treasury bills it deemed too high for its liking, in order to lower its debt servicing costs. This shift has contributed to a sharp decline in inflation from over 20% at the start of this year to 13.7% for June, and has halved the interest rates on short-term domestic debt from nearly 30% to between 14.70% for 91 day bills and 15.69% for 364 day bills, over the same period, creating a more favorable environment for longer-term financing.
Since government has been restricted to issuances need exceeding one year tenor since the DDEP, government is now saddled with the need to constantly refinance much of its domestic debt regularly, creating major liquidity risk.
Government is aiming for a public debt to Gross Domestic Product (GDP) ratio of 66.4% by the end of 2025, down from 70.5% as at the end of 2024.
