Market News

BY  Ekow Dontoh and Yinka Ibukun

(Bloomberg) -- Ghana’s new government outlined a lower budget deficit this year to “fix” the economy after a painful debt restructuring.

Finance Minister Cassiel Ato Forson told lawmakers in the capital, Accra on Tuesday that his goal for the West African nation’s primary budget balance, which excludes debt-service costs, would be a surplus of 1.5% of gross domestic product.

That represents a significant shift from 2024, when the previous administration recorded a primary deficit of 3.9% of GDP. Just three months ago his predecessor, Mohammed Amin Adam, had projected a 0.5% of GDP surplus in 2024.

Ghana’s 2035 eurobond price fell 1.2 cents to 71 cents on the dollar on the news, the most in more than four months, lifting yields to 10.25% at 2:55 p.m. in Accra.

“The state of our economy is troubling, but we will fix it,” Forson told lawmakers as he delivered his maiden budget. “It will require some sacrifices, truthfulness, transparency and discipline.”

President John Mahama vowed to “reset” the economy after he won December elections. Voters backed him over the prior administration in anger over sky-high inflation and poor economic management, which forced Ghana to seek an International Monetary Fund bailout after defaulting in 2022.

To achieve its 2025 target, the new administration proposed cutting primary government spending by more than 10% to 204.7 billion cedis ($13.2 billion), and boosting revenue and grants by 20% to 223.8 billion cedis.

“We’re committed to running a lean, efficient government,” said Forson, noting that the number of ministers have been reduced.

On the revenue side, the government plans to use technology to improve tax collection and proposed increasing a levy on mining companies’ gross output to 3% from 1%, so Africa’s top gold producer can benefit from the high global prices of bullion.

There have been some signs of recovery.

Ghana’s $3 billion IMF program has helped curb wild swings in the cedi since it was granted in May 2023, while inflation has slowed from a peak of about 54% in December 2022 to 23.1% in February. Forson aims to lower inflation to 11.9% by the end of the year by stabilizing the currency and supporting local food production.

Economic growth accelerated to 5.7% last year, driven mainly by government spending and mining output, from 3.1% the year earlier. Forson forecasts 4.4% growth in 2025.

Ghana has reworked $13 billion of eurobonds and $5.1 billion of bilateral loans, but it lacks access to international capital markets and the borrowing burden remains high.

Over the next four years, Ghana faces 150.3 billion cedis of domestic debt service obligations alongside $8.7 billion of external debt, said Forson, who described the money coming due in 2027 and 2028 as “major humps.”

(Updates with bond move in fourth paragraph)