Following the anticipated meeting between the government and representatives of the International Monetary Fund beginning tomorrow, investors have begun to restore trust in the Ghanaian economy.
As a result of Ghana's decision to request financial assistance from the Fund in order to reduce refinancing pressure, its Eurobonds rose for a second day.
The country's 2027 Eurobond, according to Bloomberg, increased 1% to 65.82 cents, the highest price in more than six weeks. Before Ghana stated last week that it will contact the IMF for balance-of-payments help, the bonds were trading at distressed levels with yields exceeding 20 percent.
According to Global Evolution investment expert Stephen Bailey-Smith, the market has expressed anxiety over the government's short-term financial need.
According to him, "an IMF programme may also provide some legitimacy to the government's promises of budgetary reform."
While Ghana wants to reduce its budget deficit from an expected 12.1% of GDP in 2021 to 7.4% of GDP this year, doing so is getting harder as pricing pressures brought on by Russia's invasion of Ukraine have a negative impact on economic growth.
In May 2022, the inflation rate climbed to a level that was more than 18 years high—27.6 percent.
The economy, which increased by 5.4 percent last year, rose by 3.3 percent in the first three months of 2022, which was less than anticipated. At the end of March 2022, public debt had climbed from 76.6 percent in December 2021 to 78 percent of GDP.
vulnerability to debt
Samantha Singh, an Africa analyst at Absa Bank Ltd. in Johannesburg, said that a prospective IMF programme "may play a significant role in helping the nation solidify its fiscal austerity path and decrease debt risks."
The sooner these regulations are put into place, Samantha Singh continued, the less severe any possible liability management may be.
From July 6 to July 13, an IMF staff delegation headed by Carlo Sdralevich, Ghana's mission chief, would be in Accra to start preliminary negotiations with the Ghanaian government regarding a potential IMF-supported programme.
Lower-rated borrowers like Ghana, Tunisia, Kenya, and Egypt are already having trouble obtaining market-based funding, and rollover risk is anticipated to worsen for several African sovereigns over the next 10 years as a result of the conflict in Ukraine.
According to Moody's, Ghana will have to make principal payments on outstanding Eurobonds totaling $7.3 billion by 2032.
Kenya has $5.9 billion, Tunisia $3 billion, and Egypt $26.9 billion.
During the epidemic, the IMF and other international lenders provided emergency finance to stabilise fragile African markets, but not all of them choose to take support, according to Kaan Nazli, a money manager at Neuberger Berman.
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