Ghana is trying to break out of the vicious circle of its sovereign debt, which, although modest, is now perceived as risky by some investors. Nevertheless, its president, Nana Akufo-Addo, says he has no regrets and remains confident of a successful outcome to the ongoing processes.

Ghana's President Nana Akufo-Addo (photo) has no regrets about his country’s debt since the borrowed resources were invested in infrastructure and economic development projects, according to Bloomberg.

Indeed, the country faces GHS576 billion ($45 billion) in sovereign debt, according to data published in November 2022. It started restructuring its debt, starting from domestic ones, but the process is quite difficult and its impacts are already visible to some investors. For instance, South African bank FirstRand depreciated its sovereign Ghanaian assets by 57%, leading to a $27.3 million drawdown in the book value of those assets.  

The situation is complicated by continuously high inflation and a depreciated local currency, which is trading at its lows against the US dollar. Nevertheless, President Akufo-Addo is confident that the country can complete the restructuring process on time, which is a key condition for accessing a $3 billion International Monetary Fund loan and restoring macroeconomic stability.

Meanwhile, S&P Global Ratings estimates that private creditors may have to write off up to 50 percent of their sovereign Ghanaian assets, which is a challenge for the country. Some investors have even activated the mechanism that will ensure they get compensated in the event of a Ghanaian sovereign default.  Also, the country began discussions with China this month but, the outcome of these exchanges remains to be seen.

Some analysts are sure to point out the risks of investing in sovereign bonds in emerging markets. But FirstRand's willingness to continue investing in Ghana and Morocco's recent issuance of Eurobonds at historically low rates show that the global credit market is maybe shifting its view of risks on the continent.