The government is unlikely to issue Eurobonds at attractive yields in the short term even if it secures an International Monetary Fund support programme this month or in the next couple of months.

In its February 2023 Africa Monitor Report, Fitch Solutions, said the rising interest rates which has been hiked to 28% at the beginning of last year make domestic borrowing more expensive.

“First, Ghana faces external financing constraints. Indeed, the country has been cut off from the international capital market since late-2021 due to subdued investor confidence. While an expected IMF deal in Quarter 1, 2023 will gradually improve market sentiment, it is unlikely that the government will be able to issue Eurobonds at attractive yields in the short term”.

“In addition, the IMF programme (expected to be worth $3 billion over a three-year period) would only finance a portion of the targeted deficit”, it explained further.

Secondly, Fitch Solutions, said the rising interest rates make domestic borrowing more expensive, adding, “given that Ghana already faces elevated interest payments, a substantial increase in domestic debt issuance would weaken fiscal dynamics further.

Furthermore, it said the domestic debt exchange programe would make domestic banks more cautious in lending to the government in 2023.

Nonetheless, it pointed that the government's expansionary spending plans will result in a rising public debt-to-Gross Domestic Product (GDP) ratio.

Indeed, it expects the public debt-to-GDP ratio to continue on an upward trajectory until 2028 (reaching 94.4%), after which it will start to moderate.

Risks to outlook

It said there is a risk that the IMF could express concerns about Ghana's 2023 budget given the elevated spending target.

This could lead to the government having to revise their fiscal plans, which would draw out the negotiation process.