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The country has enough reserves to honour its debt repayment obligations to Eurobond holders in the second half of the year, the Governor of the Bank of Ghana, Dr Ernest Addison has confirmed.
Although Ghana’s negotiations with Eurobond holders have led to the suspension of coupon payments until 2026, the country is expected to make some bullet payments on the principal debt.
According to IC Africa Research, Ghana is expected to make debt service payments between $600m and $800m this year. About $478 million of this amount is expected to be paid to Eurobond holders who the country recently concluded a debt restructuring deal with.
The restructuring deal, which saw the bondholders take a 37% haircut, is expected to lead to a debt forgiveness of about $4.7 billion and debt service relief of $4.4
billion between 2023 to 2026.
The government is expected to launch a consent solicitation and exchange of memorandum on the international capital market in the coming weeks.
This will allow the government to request the consent of Eurobond investors to amend the original terms of the bonds.
After the completion of this exercise in September this year, the government will not be required to make the first bullet payment of $478 million.
Addressing the media at the 119th Monetary Policy Committee (MPC) press briefing, Dr Addison said, “We are very much aware of the upcoming payments, if you look at the cash flow projections, you would see that provisions have been made for this particular payment.
“So yes, we have built up reserves to meet some of these lumpy payments in the outlook,” he stated.
Ghana’s gross international reserves improved in the first half of the year to $6.86 billion from the $5.34 billion recorded in the same period in 2023.
Commenting on the performance of the Cedi, the Governor noted that the Ghana cedi came under pressure in the first half of the year, especially in May 2024, but has since eased.
He said the relative stability of the foreign exchange market in the past few weeks reflects the continued tight monetary policy stance, implementation of the dynamic Cash Reserve Ratio (CRR) to mop excess liquidity, revised regulations on advanced payments for imports by the bank and positive sentiments from the third tranche of the IMF Extended Credit Facility and agreement in principle with external creditors.
“From the beginning of the year to July 19, 2024, the Ghana Cedi depreciated by 19.6% against the US Dollar, compared with 22.1% for the same period of last year,” he stated.
He said the latest confidence surveys indicated some softening of consumer and business sentiments. He said these findings were broadly in line with observed trends in Ghana’s Purchasing Managers’ Index (PMI), which fell below the 50.0 benchmark to 49.7 in June 2024, from 51.6 in the previous month.
He added that recent price developments suggest a resumption of the disinflation process. In June 2024, headline inflation eased to 22.8% from 23.1% in May and 25 %in April.
The decline in headline inflation was attributed to a deceleration in non-food inflation by 2 percentage points to 21.6% in June. Food inflation, on the other hand, increased by 1.4 percentage points to 24% over the same period.
“In line with the ease in headline inflation, the BoG’s main core inflation measure, which excludes energy and utility items from the consumer basket, declined to 22.1% in June 2024 from 22.6% in May,” Dr Addison said.
He said fiscal operations in the first half year were broadly aligned within the set targets.
He also indicated that private sector credit extension steadily improved in the first half of the year.
In nominal terms, private sector credit grew by 17.6% in June 2024, relative to the 16.1% growth recorded in the same comparative period of 2023.
In real terms, the contraction in credit to the private sector moderated at 4.2% compared to a contraction of 18.5% recorded in June 2023.
Interest rate trends were broadly mixed at the short end of the market.
The 91-day and 182-day Treasury bill rates increased to 24.91% and 26.84%, respectively in June 2024, from 21.77% and 24.58%, in June 2023.
In contrast, rates on the 364-day instrument decreased to 27.83% from 28.66% over the same comparative period.
On the interbank market, the Weighted Average Rate increased, underpinned by the tight monetary policy stance and sustained liquidity withdrawals from the market.
The rate increased to 28.83% in June 2024 from 26.01% in June 2023. Over the same period, however, average lending rates of banks declined marginally to 31.10% from 31.15%.Banking sector
The banking sector's performance in the first half of the year points to continued recovery from the impact of the Domestic Debt Exchange Programme.
Total banking sector assets grew by 33.3% to GH¢323.1 billion in June 2024, relative to 21.2% growth in June 2023. Profitability, liquidity and efficiency indicators also improved over the period.
The Capital Adequacy Ratio (CAR) adjusted for reliefs remained unchanged at 14.3% between June 2023 and June 2024. Without reliefs, the CAR was reported at 10.6% in June 2024, higher than the 7.4% recorded in June 2023.
Despite improvements in the banking sector’s performance, Dr Addison said elevated credit risk posed a threat to the sector’s recovery process.
The industry’s NPL ratio was 24.1% in June 2024, up from 18.7% in June 2023.
Dr Addison said the consistent rebound in profits, adherence to recapitalisation plans and enforcement of strict credit underwriting standards would help ensure that banks remain on the path to full recovery and resilience.
