Financial Institutions & Capital Markets
Introduction
According to Ghana's Minister of Finance "...the year 2022 will go down as one of the most difficult and eventful years in the economic history of our country." This report highlights what we believe are the relevant issues from 2022 and how responses to these challenges will shape the business and legal outlook for corporates and the financial services industry in the year 2023.
2022 under review – a battered and bruised economy?
Rising inflation (measured at a 22- year record high of 54.1% as at December 2022) and a weakened currency (which at one point, shed as much as 53.8% of its value) conspired to make 2022 a truly challenging year for the national economy, private businesses and households. The weakened macroeconomic environment adversely affected market sentiment regarding Ghana's economic viability, resulting in low investor confidence, downgrades to its credit ratings, massive capital outflows and loss of access to external capital markets.
These developments impacted the country's debt sustainability negatively, reduced credit options and made it impossible or extremely expensive for the Government to finance its operations and refinance maturing debt, while currency depreciation alone is reported to have increased Ghana's debt stock by GHS 93 billion in 2022.
Towards the end of the year, the Government announced a raft of debt restructuring measures aimed at restoring debt sustainability, including
(i) a domestic debt exchange programme (under which the Government intends to replace certain domestic notes and bonds issued by the Government of Ghana and 2 state[1]owned enterprises (i.e. ESLA Plc and Daakye Plc) with new benchmark Government of Ghana bonds with the same aggregate principal amount (including applicable capitalised accrued and unpaid interest) and with an aggregate lower average coupon and extended average maturity) and
(ii) a suspension of all debt service payments under certain categories of its external debt (including Eurobonds, commercial term loans and most of Ghana's bilateral debt).
Further, the Government has achieved a staff level agreement on a financing programme with the International Monetary Fund (IMF) which is aimed at restoring macroeconomic stability and public debt sustainability. It is expected that this deal will be adopted by the governing board of the IMF as soon as possible in 2023, signalling the turning point for the country's economic misfortunes.
Outlook for 2023 – On the way to recovery?
There has generally been mixed reviews on the outlook for 2023. While some, like the African Development Bank, have expressed a positive outlook for Ghana (with projected GDP growth of 5.1%, inflation falling to 9.1%, and fiscal deficit narrowing down to 10.3%) others, like Fitch, have a grim view (with GDP projected to slow down to 2.9% and inflation projected to only come down gradually). The following are some of the key interventions the government has taken or intends to take regarding the relevant sectors of the economy.
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