The last three years have been rough for Ghanaian investors. Following the COVID-19 pandemic that slowed economic activity in 2020, investors were faced with a sovereign debt default that resulted in a complete halt of external debt payments as well as a restructuring of domestic debt. Inflation reached a high of 54% in December 2022 before declining to 26% in November 2023. Moreover, the Ghana Cedi lost half of its value against the US dollar over the two-year period ended December 2023.

In tackling its economic challenges the government has adopted new revenue measures including a tax on electronic transactions, new excise taxes, a COVID-19 sales levy, an increase in import duties due to a removal of discounts on benchmark import values, a growth and sustainability levy, and a financial sector clean up levy charging 5% on banks’ pre-tax profits. The central bank has also tightened monetary conditions – raising the policy rate from 14.5% at the start of 2021 to 30% as at November 2023.

This combination of debt restructuring, high inflation, sharp currency depreciation, increased taxation, and tight monetary conditions has knocked some optimism out of investors and has taken the shine off Ghana’s reputation as a top investment destination on the continent. As we enter another year, there are seven key matters that investors should keep an eye on. How these play out will be crucial for investments in the country.

1. The second disbursement from the IMF. In May 2023 Ghana received approval for a $3 billion Extended Credit Facility with the IMF which came with a $600 million disbursement. The second disbursement has stalled as Ghana’s bilateral creditors were unable to agree on a deal for restructuring the almost $6 billion the country owes to them. The IMF requires an agreement with these creditors before it releases another $600 million to the country. A disbursement would be a positive development because not only would the funds help the Ghana cedi, but it would also signal that Ghana is close to an arrangement with its foreign lenders that will take it on the long path to regaining its debt credibility. The failure to receive these funds will point to the reverse situation.
2. The second payment of coupons on restructured domestic bonds. Ghana’s formerly active domestic debt market ground to a halt following the restructuring of domestic bonds. The government paid the first coupon of GH¢2.4 billion on the restructured bonds in August 2023. The next coupon is due to be paid in February 2024. Should the government pay without a hitch, it could spark some interest in trading domestic bonds once again.
3. The recovery of industry. Ghana’s industrial sector continued to struggle in 2023, posting negative year-on-year growth rates for the first three quarters of the year at an average of -2.9%. Within this sector oil & gas posted average growth of -4%, electricity -3.4%, manufacturing 0%, and construction a whopping -8%, all within the first three quarters of 2023. Should this pace of deindustrialization continue the prospects for Ghana’s long-term economic growth will be grim indeed.
4. Bank of Ghana (BoG) financing of central government. Under the government’s debt restructuring programme, the BoG wrote off GH¢48 billion owed to it by the central government. This debt was part of the GH¢77 billion that had been accumulated by the government from its central bank. The central bank’s commitment to fighting inflation would be validated by its ability to commit to not lending the government any further money. Should this happen, and we will know by the mid-year review in July, then the credibility of the bank will get a much needed boost.
5. Recovery of banking stocks. Financial stocks on the Ghana Stock Exchange (GSE) fell by 7% in 2023 even as the overall market returned 28%. According to the pwc 2023 Ghana Banking Survey, banks booked a net loss of about GH¢6.6 billion in 2022 largely due to writing off the value of government bonds in their books. Banks such as Republic Bank, Standard Chartered, GCB Bank, Access Bank, Ecobank, and CAL Bank all recorded double-digit percentage declines in their share prices. Should the bearish trend continue, investors should be worried about the chances for a recovery.
6. Government’s engagement with Independent Power Producers (IPPs). An estimated $1.5 billion was owed to IPPs as at June 2023. These producers, who generate about 60% of the country’s electricity, have repeatedly refused a restructuring of the debt owed to them by government. In early December the government quickly staved off the shutdown of a key power plant by promising to pay $60 million. Electricity tariffs have about doubled since September 2022, and it is likely a contributor to the poor performance of Ghana’s industrial sector. Should government’s struggle to pay IPPs persist, then we should expect further tariff hikes as the government tries to prevent power cuts.
7. Political stability. The 2024 General Elections scheduled for December 7 will be a contest between current Vice President, Dr Mahamudu Bawumia of the NPP and former President, John Mahama of the NDC. Many analysts are expecting the election to be largely free and fair and for any power transition to be a smooth one. While the risk of political upheaval is low, it is not zero, and therefore investors will do well to keep their eyes on developments in that regard.

You can be sure that as at CediTalk will keep an eye on crucial developments and will update you to help you make informed investing decisions.