As Ghana’s debt-restructuring talks approach their final stretch, the country’s leaders are facing a new dilemma.
The government needs to prove to investors that it can keep spending in check as it navigates a debt revamp, following a 2022 default on some $20 billion worth of international bonds and loans. But the ruling party also faces an election this December, pressuring it to up spending on things voters care about. That’s leading some investors to fret the election will set Ghana back onto the slippery slope of wider budget deficits, potentially harming the debt restructuring progress.
“I’ve been covering Ghana since 2012, and in each election since then, the office bearer has overspent as the margin for victory between the two contesting parties is generally small,” said Carmen Altenkirch, an emerging market sovereign analyst at Aviva Investors Global Services Ltd.
“The thing is, if Ghana wants to re-access the Eurobond market, at some point they really have to rebuild trust with investors. And that comes from holding the line on fiscal consolidation.”
Ghana has always overshot its expenditure budget in election years, World Bank data shows, with the overspending particularly pronounced during the ruling party’s second term. In the run-up to the 2020 vote for instance, the budget deficit blew out to 11.4%, versus the targeted 4.7%.
Currently, the New Patriotic Party, headed by 60 year-old economist Mahamadu , is pushing for a third term. The opposition National Democratic Congress is headed by former President John Mahama.
