Ensure your local partners are well-positioned to capitalize on a recovery in private and public sector sentiment
Ghana has recently realized two milestones in its external debt restructuring process following an IMF deal signed in May 2023: the Ghanaian government has signed a Memorandum of Understanding (MoU) with its official creditor’s committee to restructure an estimated USD5.4 billion of bilateral debt, and reached an agreement in principle with its Eurobond holders regarding the terms of restructuring an estimated USD13 billion of debt. This will pave the way for Ghana to formally exit default by the end of Q3 2024, allowing it to regain access to global credit markets for the first time since late 2022.
Business Implications
Multinationals should ensure that their demand assumptions incorporate potential improvements to private and public sector opportunities following a formal exit from default in Q3 2024. The private sector, which has already embarked on a process of gradual recovery, will benefit from a return of foreign investment in 2025 which significantly diminished between 2022 and 2024; B2B firms are advised to incentivize local partners to closely track foreign investment announcements which will generate opportunities in key sectors such as ICT and fintech. However, the recovery of public sector demand will occur at a slower pace, necessitating taking a more cautious and tactical approach when selling to the government. B2G firms should emphasize the cost-cutting attributes or long-term efficiency gains of their offerings in light of still-strained public finances.
How will the debt-restructuring process impact the cedi’s outlook?
FrontierView forecasts the cedi to average 14.1:USD in 2024 and 14.7:USD in 2025. However, it will exhibit volatility as the Bank of refrains from intervening in the foreign exchange market as part of the country’s IMF deal. The debt-restructuring deal will only provide partial reprieve to the cedi, the benefits to which will be most pronounced between Q4 2024 and Q1 2025 aided by foreign inflows and US Fed interest rate cuts. The cedi is forecast to appreciate from GHS 15.1:USD in Q3 2024 to GHS 14.8:USD in Q1 2025 on a quarterly average basis. Nevertheless, pressure on the currency emanating from elevated demand for imports, an uncertain cocoa outlook (which represents a major source of FOREX inflows), and still-weak FOREX reserves will limit the magnitude of appreciation.
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