On Friday, January 19, the IMF released a statement announcing the completion of the first review of Ghana’s 3-year programme with the fund and the approval of a disbursement of $600 million. According to the IMF, “Ghana’s performance under the program has been strong. All quantitative performance criteria for the first review and almost all indicative targets and structural benchmarks were met.” The disbursement will help shore up the country’s Gross International Reserves which were only $5.15 billion (2.4 months of import cover) back in November 2023 and also unlock at least $300 million in extra financing from the World Bank.

The significance of this disbursement is not only in the funds being released, but also because it’s an indication that Ghana has reached an agreement with its bilateral creditors which was a precondition for the release of the funds. Early reports are that Ghana has had payments on its $5.4 billion in bilateral debt frozen until May 2026. The country now seeks an agreement with its Eurobond creditors (holding about $13 billion) by the end of March this year.

In my outlook for 2024 I had listed this development as the number one issue for investors to follow, and for good reason. Crossing this hurdle reduces a lot of the uncertainty associated with investing in Ghana specifically in the following areas.

• Currency risk. For now the exchange rate is more likely to reflect fundamentals rather than the risk of actions that creditors may take. This would especially be true if an agreement can be reached with eurobond creditors.
• Default risk. The freeze on interest payments formalizes what has essentially been government’s policy since December 2022, and until May 2026 the risk of government default on bilateral debt is technically impossible. This should also be a positive signal for domestic debt.
• Liquidity risk. With the disbursement, domestic investors have some assurance that the government will be able to meet the estimated GH¢2.4 billion interest payment on the restructured bonds in February 2024. Activity is also expected to pick up in the fixed income market that will provide some liquidity to allow some bondholders to exit.

Ghana’s economy is not out of the woods yet although inflation has fallen from 54% in 2022 to 23% in 2023. Growth has been disappointing with the IMF projecting that the economy grew by only 2.3% in 2023 and expecting growth of 2.8% in 2024. Even more worrying, the IMF projects that per capita GDP shrunk by 0.3% in 2023. An estimated 850,000 people have been thrown into poverty by what I reckon has been a 90% cumulative rise in the price level over the 2-year period ended December 2023.

What has troubled Ghana’s financial markets most has not been the weak fundamentals, but rather the lack of liquidity and certainty that accompanied the country’s fiscal problems, credit rating cut, and debt default. With some certainty coming back into the country’s debt position, markets could see a return of investors who have stayed on the sidelines. And this could translate into more activity and liquidity which is sorely needed on the market. I will be monitoring the market (especially mutual funds) to see what the impact of this development will be. As always, I will keep you updated.