Ghana Bonds Rally as Nation Assures Investors on Fiscal Targets

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ACCRA (Capital Markets in Africa) – Ghana’s dollar bonds rallied Thursday as the government moved to reassure investors that it is committed to fiscal targets in the budget, including expenditure cuts this year if revenue falls short.Yields on Ghana’s $1 billion of 2049 dropped 33 basis points, the most since November 2020, retreating from a near-two-year high to 12.29%. The rate on the nation’s $1 billion of 2026 securities plunged 94 basis points to 12.58%.

The government is willing to cut spending by as much as 20%, depending on revenue performance, to put the budget on a sustainable path in a pandemic environment, Minister of Finance Ken Ofori-Atta said Wednesday.

“These are contingent expenditure cuts that should materialize if fiscal revenue targets are not met,” said Carlos de Sousa, who helps oversee the $3.8 billion developing-nation bond fund at Vontobel Asset Management and participated in a non-deal roadshow by the government Thursday. “I see this as a commitment to achieve their fiscal deficit targets of 7.4% of GDP this year.”

The premium investors demand to hold Ghana debt crossed the 1,000 basis points mark this month, a level considered distressed, as investors judged that re-financing debt in the Eurobond market won’t be an option when the Federal Reserve hikes rates and budget targets remain elusive. The spread narrowed 45 basis points on Thursday to 1,110, according to JPMorgan Chase & Co. indexes.

Ofori-Atta’s comments and the engagement with investors helped allay some of the fiscal concerns, according to De Sousa.

“It’s been positive to see that the government is taking their loss of market access more seriously now,” De Sousa said. “Just the fact that they engage in an open and honest discussion with investors is positive by itself.”

 

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