Ghana's Strategic Return to Domestic Debt Markets: A Prudent Path to Economic Revival and Investor Opportunity

Ghana's 2025 economic narrative is one of cautious optimism, marked by a strategic re-entry into domestic debt markets and a broader fiscal consolidation agenda. After navigating one of the most severe debt crises in its history, the country is now recalibrating its fiscal framework to balance growth with sustainability. For investors, this represents a unique intersection of risk and reward, where macroeconomic stability, structural reforms, and evolving market dynamics converge.

Macroeconomic Stability: A Fragile but Improving Foundation

Ghana's recent economic performance underscores its commitment to fiscal discipline. The 5.3% year-on-year GDP growth in Q1 2025—a sharp rebound from the 2023–2024 slump—signals resilience in key sectors like agriculture and infrastructure. Inflation, once a persistent challenge, has moderated to 13.7% in June 2025, a 10-percentage-point drop since December 2024. This improvement is attributed to tighter monetary policy, including the Bank of Ghana's 28% policy rate, and structural reforms such as the Ghana Gold Board's oversight of the mining sector.

However, the country's public debt remains a critical concern. At 55% of GDP as of March 2025, the debt burden is partially offset by economic expansion, but the inverted yield curve—where short-term Treasury bill rates (14.69% to 15.66%) far exceed long-term bond yields (8.51%–9.1%)—highlights lingering market skepticism.

Fiscal Reforms: A Blueprint for Sovereign Debt Restructuring

The government's fiscal reforms are pivotal to its re-entry strategy. The 2025 budget prioritizes a 3.8% GDP fiscal deficit, supported by a 11.1% primary surplus in Q1 2025, exceeding initial targets. This fiscal prudence is underpinned by the IMF's $3 billion Extended Credit Facility (ECF) and a successful Eurobond exchange program that extended maturities on $10 billion in obligations.

Domestically, the launch of a digital platform for retail investors to access Treasury bills and bonds has broadened the investor base, while tax incentives for pension funds and insurance companies are deepening liquidity. These reforms are critical for reducing reliance on volatile foreign borrowing.

Domestic Debt Market Re-entry: A Calculated Move

Ghana's planned 2-year bond issuance in Q2 2025 marks a cautious return to the domestic bond market, a year after the Domestic Debt Exchange Program (DDEP) restructured $203 billion in obligations. The DDEP, with an 89% participation rate, reduced the debt-to-GDP ratio to 66% in 2025 (from 70.2% in 2024) by extending maturities and securing savings of 7% of GDP.

Despite progress, challenges persist. The inverted yield curve and elevated borrowing costs (22%–33.7% for short-term bills) reflect investor wariness. The government's focus on aligning new debt with IMF sustainability targets—aiming for a 55% debt-to-GDP ratio by 2028—suggests a phased approach to rebuilding market trust.

Investment Potential: Balancing Opportunity and Risk

For investors, Ghana's domestic debt market presents a compelling case. The 6.875% yield on the 2030 Eurobond, coupled with Fitch's stable outlook, positions it as a high-yield play in emerging markets. Infrastructure projects like the Tema Port Expansion and Western Railway Line, backed by multilateral lenders, offer long-term returns. Additionally, the government's emphasis on digital procurement and public-private partnerships (PPP Act 1039) enhances transparency and project viability.

However, risks remain. Political uncertainty ahead of the 2026 elections and global commodity price volatility could disrupt fiscal plans. Investors should prioritize projects with cost-reflective pricing mechanisms and diversify across sectors to mitigate sector-specific shocks.

Conclusion: A Prudent Path Forward

Ghana's re-entry into domestic debt markets is a calculated step toward fiscal sustainability, supported by IMF backing and structural reforms. While the inverted yield curve and high borrowing costs underscore lingering risks, the government's commitment to transparency and economic resilience offers a foundation for cautious optimism. For investors, the key lies in aligning with the country's long-term growth trajectory while hedging against macroeconomic volatility. As Ghana navigates this delicate balance, its story serves as a reminder that recovery is not a sprint but a marathon—one where patience and prudence are rewarded.