Bondholders are no longer willing to cut Ghana any slack as the era of cheap money draws to a close.
Investors believe that re-financing debt in the Eurobond market won’t be an option when the Federal Reserve raises rates and budget targets remain elusive, according to Bloomberg. The West African nation’s dollar bonds have fallen 10% in ten days, pushing it deeper into crisis territory.
The premium requested on Ghana’s sovereign dollar debt increased to 1,145 basis points on Tuesday, up from 683 basis points in September.
According to a Bloomberg index, its $27 billion in foreign debt has suffered the worst start to the year among emerging economies, extending last year’s 14 percent loss.
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Meanwhile, according to the World Bank’s Global Prospects report for 2022, “several Sub-Saharan African nations suffered a considerable deterioration in fiscal balances due to deployment relief measures, eroding already-narrow fiscal space (Ghana, Mozambique, Rwanda).”
“This, together with constraints on financing and pressures to improve debt sustainability, will lead to a much less supportive fiscal stance across the region over the forecast horizon.”
The Bretton Woods institution added: “Fiscal adjustments are expected to predominantly happen on the expenditure side with a bigger reduction in fiscal deficits in resource-rich countries, partly reflecting revenue boosts from higher commodity prices and consolidation efforts in some countries”.
