Economic Analysis of Ghana’s 2019 Eurobond

Ken Ofori-Atta, Minister of Finance, Ghana

Accra, Ghana, March 26, 2019//-Government of Ghana on 19th March, 2019 issued its seventh Eurobond after its maiden appearance on the international capital market in 2007.

An amount of US$ 3 billion was raised in 3 tranches thus 7, 12 and 31 years after the bond was oversubscribed by 7 times.

The proceeds of the bond as stipulated in the 2019 budget is for budgetary supportand liability management similar to previous bonds. Issuance of Eurobonds has become an essential source of external financing for successive governments but this is not devoid of risks.

Table 1 below shows Eurobonds issued by Ghana.

Table 1


2007 $750 million 8.50 10
2012 $1 billion 7.87 12
2014 $1 billion 8.12 12
2015 $1 billion 10.75 15
2016 $750 million 9.75 5
2018 $ 1 billion

$ 1 billion





2019 $ 1 billion

$ 1 billion

$ 1 billion







Source: Ministry of Finance, Bank of Ghana 

The cost of servicing Ghana’s debt has been rising over the years while revenue to GDPremains below target. As projected in the 2019 budget, government has earmarked over GH¢16 billion of revenue (over 26.6%) on interest payments.

This risk is exacerbated by the depreciation of the local currency as the percentage of external debt on the books of government remain substantial. External debt to GDP stood at 29 % while domestic debt stood at 28.18% as at September 2018 according to rebased estimates.

Table 2 is a summary of Central Government Fiscal Operation from 2018 to 2022.

Table 2

Summary of Central Government Fiscal Operation (2018-2022)

Indicator 2018 (Proj. Outturn) 2019 2020 2021 2022
Total Revenue and Grants 46,807 58,905 67,818 74,746 79,405
Percentage of Rebased GDP 15.7 17.1 17.1 16.6 15.2
Total Expenditure 57,823 73,441 82,365 89,268 95,368
Percentage rebased GDP 19.4 21.3 20.8 19.8 18.3
Budget Deficit/ GDP -3.7 -4.2 -3.7 -3.2 -3.1

Source: 2019 Budget

The percentage of revenue to GDP remains low as compared to other lower middle income economies. One critical bottleneck to mobilizing revenue is tax exemptions which has ballooned over the years.

In the last eight (8) years, tax exemptions (import duty, import VAT, import NHIL and domestic VAT) in the economy have grown from GH¢391.90 million (0.9% of GDP) in 2010 to GH¢5,269.99 million (2.6% of GDP) in 2017. A bill has been laid in parliament to review it which is a step in the right direction in generating additional revenue.

IMF Program Completion & Debt Accumulation

A day after the bond issuance, the Executive Board of the International Monetary Fund (IMF) completed the seventh and eight reviews under the Extended Credit Facility (ECF) supported arrangement.

This led to the disbursement of a cumulative amount of SDR132.84 million (about US$185.2 million) to Ghana.The ECF program aimed to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.

Despite the macroeconomic gains made thus far, public debt accumulation and its associated high interest payment could trigger some macroeconomicimbalances in the foreseeable future.

In a press statement after the review, the Fund opined that,“Debt management has improved, though reliance on foreign investors has increased Ghana’s exposure to market sentiment and exchange rate risk”. It is worthy of note that, the quest forforeign investors to externalize their returns partly caused the recent depreciation of the cedi.

Public debt to GDP rose steadily from 42.9% in 2013 to 56.85% in 2016 and further to 57.18% (rebased estimate) in September, 2018.This is similar to the continental story.

According to United Nations Economic Commission for Africa 2019 Economic Report on Africa, Africa’s stock of public external debt averaged about US$309 billion over 2000–2006 and then rose further to US$707 billion in 2017, with a 15.5 percent increase from 2016 alone.The aforementioned report named Ghana among 11 countries in Africa facing high risk of debt distress.

Election yearsin Ghana have been characterized by huge budget deficit and debt. As 2020 polls looms, government must demonstrate commitment to maintaining fiscal discipline post IMF program.

The establishment of an independent fiscal council is a step in the right direction but the council’s autonomy devoid of non-political interference will guarantee fiscal responsibility, macroeconomic stability and debt sustainability.

In conclusion, accumulation of external debt and foreign participation in local bond scan pose risk Ghana’s medium to long-term public debt sustainability.

This can be aggravated by exchange rate volatility, weak export earnings among others. Government should embark on structural reforms to boost revenue mobilization (tax and non-tax)as grant/concessional financing to GDP continues to decline.

By Emmanuel Amoah-Darkwah Ch.E

Economic Analyst

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