By Toma Imirhe
The Government of Ghana is deliberately staying away from the international bond market despite the sharp improvement in the country’s macroeconomic indicators, and consequent sovereign credit ratings, with policymakers arguing that elevated United States Treasury yields rather than unusually punitive investor risk premiums would still make any Eurobond issuance too expensive.
Officials at the Ministry of Finance and the Bank of Ghana say the country has little incentive to rush back onto the Eurobond market after the painful lessons of the 2022 debt crisis, especially at a time when global borrowing costs remain high and the country can increasingly meet its financing needs domestically.
The cautious stance is also being encouraged by the International Monetary Fund, which has repeatedly stressed the importance of preserving debt sustainability and avoiding a premature return to costly commercial external borrowing at the end of the country’s IMF-supported programme.
Although Ghana’s sovereign risk perception has improved markedly from the distressed levels recorded immediately after the debt crisis erupted in late 2022, analysts note that benchmark US Treasury yields have climbed significantly over the past two years, keeping overall borrowing costs elevated for frontier market issuers.
“The spread Ghana would pay today is no longer the main issue,” a fixed income trader at a leading Accra-based investment bank told Economy Times. “The problem is that the underlying US Treasury yield curve itself is still high, so even improved spreads translate into expensive coupons.”
Currently, US Treasury yields are unusually high by historical standards with the US 10-year Treasury bond yield trading around 4.6%, while the 30-year exceeds 5%.
Using those US benchmark yields, Ghana would probably face spreads of up to 450 to 700 basis points (4.5% to 7.0%) if it attempted a fresh long term Eurobond issue now.
That translates into about 9% to 11.5% for a new 10-year Eurobond; although possibly slightly lower for a shorter 5–7 year tenor, but potentially higher if market conditions deteriorated or oil prices surged.
In practical terms, Ghana could probably re-enter the Eurobond market in 2026 if necessary, but only at close to double-digit borrowing costs.
That is a huge improvement from the crisis period, but still expensive relative to Ghana’s pre-crisis years.
In 2019, when Ghana successfully issued US$3 billion in Eurobonds, investor demand exceeded US$21 billion, allowing the country to secure financing at rates ranging between about 7.9% and 10.75% depending on tenor.
But even this was relatively higher than the terms Ghana got during its earlier years on the Eurobond market. In July 2013, Ghana issued a US$1 billion 10-year Eurobond with a coupon of 7.875%, and the issue was heavily oversubscribed.
At the time US 10-year Treasury yields were about 2.6% and therefore Ghana’s spread was roughly 525 basis points.
By contrast, after Ghana lost international market access in 2022 amid debt sustainability concerns, yields on Ghanaian Eurobonds surged to distressed levels well above 30% in secondary markets, effectively shutting the country out of international capital markets.
Immediately after Ghana suspended payments on much of its external debt in late 2022, the country’s Eurobonds traded at deeply distressed levels, trading at 30–40 cents on the dollar as yields exploded into the 30%–40% range and spreads over US Treasuries exceeded 2,500 basis points and in some cases approached 3,500 basis points. Consequently, with US Treasuries yielding roughly 3.5%–4%, Ghana’s implied borrowing cost was therefore roughly 30%–40%..
While market conditions have improved substantially since then following debt restructuring and macroeconomic stabilisation, analysts estimate that a new Ghana Eurobond today could still require a coupon in the low-to-mid teens once current US Treasury yields are added to Ghana’s remaining sovereign risk premium.
Senior government officials have therefore signalled that the country is under no pressure to test international investor appetite in the near term.
Recent comments from senior Finance Ministry officials indicate government prefers to consolidate gains in fiscal discipline and debt sustainability before considering another Eurobond issuance.
Instead, authorities are increasingly focusing on rebuilding the domestic bond market, where conditions have improved sharply over the past year following declining inflation, falling treasury bill rates and renewed investor confidence.
The government has already resumed issuance of longer-dated cedi instruments after an enforced three year hiatus, through a recent seven-year domestic bond issue. Instructively that issuance was very successful, attracting over GHc3 billion in bids at a settlement rate of 12.5%.
Domestic market conditions are now considerably more favourable than during the height of the crisis. Treasury bill yields have declined steeply from the elevated levels seen in 2023 and 2024, while improving liquidity conditions are gradually extending the tenor appetite of local institutional investors such as pension funds, banks and insurance firms. Indeed, government is now encouraged to let COCOBOD issue bonds on its own balance sheet to the tune of the cedi equivalent of US$1 billion to finance purchases of cocoa beans from local farmers during the next crop season.
However, the domestic financing strategy still presents important policy choices.
One option is to rely primarily on local institutional investors and pension funds for medium- to long-term cedi financing. This reduces exchange rate risk because the debt is denominated in local currency, but it can potentially crowd out private sector borrowing if government absorbs too much domestic liquidity.
Another option is to cautiously reopen portions of the domestic bond market to foreign investors seeking high-yield local currency assets.
That possibility remains controversial because foreign participation in cedi bonds introduces exchange rate risks and can create vulnerability to sudden capital outflows during periods of market stress.
Professor Godfred Bokpin of the University of Ghana’s Business School recently warned that allowing extensive offshore participation in domestic bonds could complicate Ghana’s debt sustainability profile and potentially create fresh external sector vulnerabilities.
The government itself has become more conscious of such risks after the experience of previous foreign participation in domestic debt instruments. Parliamentary discussions earlier this year highlighted the high interest and foreign exchange costs associated with earlier external and offshore-funded borrowing programmes.
A senior treasury analyst at a local commercial bank said the authorities appear to be pursuing a “middle path.”
“They want the benefits of a functioning domestic bond market without recreating the exchange rate vulnerabilities that contributed to the last crisis,” the analyst said. “That means gradually extending tenors domestically while being very selective about foreign participation.”
Officials at the Bank of Ghana have meanwhile continued emphasising macroeconomic stability, reserve accumulation and exchange rate management as key priorities in rebuilding investor confidence.
For now, market participants say Ghana’s restraint is being positively received by both multilateral institutions and investors.
“The fact that Ghana can issue domestically again gives policymakers breathing room,” said one emerging markets analyst. “There is no immediate reason to rush back into expensive foreign currency borrowing simply to prove market access.”
With global bond yields still elevated and memories of the recent debt crisis fresh, Ghana’s policymakers appear determined to prioritise affordability and sustainability over a symbolic return to the Eurobond market.
