At end November 2018, Ghana’s external debt was $18 billion, figures recently published by the central bank reveal. Even though the debt-to-GDP ratio has slightly decreased to 28.9% against 29.3% at the end of 2017, there are worrying indicators.

Despite a rise of the trade balance to $1.7 billion in December 2018, the country’s external debt was 10 times higher than net exports. At the same time, the country’s external position worsened slightly.

The gross international reserves at end December 2018 was $7 billion and it could just cover 3.7 months of imports (despite the support of the trade balance by the oil sector that does not create many jobs or inclusive direct growth) while in December 2017, it was $7.5 billion for 4.3 months of imports.

Gold and cocoa, that are the traditional economic sectors and employ the most, generated less foreign currency with their respective contribution to exports valued at $5.4 billion and $2 billion respectively against $5.7 billion and $2.6 billion at end of 2017. During the period under review, the net capital account was divided by two going from $3 billion to $1.5 billion.  

The government wants to substantially reduce its debt by 2021 but, for the time being, it has to continue to solicit the international market and it already announced the possibility of a $3 billion issuance. Its last issuance was in May 2018 and, it was oversubscribed by four times.

Investors already know the country which never defaulted on its Eurobonds on the international market. The market sentiment for 2019 issuances is to be monitored since last year’s strong growth outlooks were disproved. For instance, GDP growth was 6.4% below the 8% forecast.

More important solicitation of the local market (for short and long-term financing) is now possible. The central bank seems to have paved the way for that. Between December 2017 and January 2019, it decreased its benchmark interest rate by four percentage points (from 20% to 16%).

Idriss Linge