Ghana's dollar-denominated bonds emerged as the top performers among emerging markets in May. They delivered an impressive 8.7% total return, significantly outpacing the average 0.4% return for emerging markets during the same period.
This remarkable turnaround comes three years after Ghana's debt default in 2022, which led the country to seek assistance from the International Monetary Fund (IMF). The resurgence is attributed to a combination of factors, including increased gold exports, trade surpluses, and a notable decline in inflation. Inflation has decreased to 21.2% in April from a peak of 54% in December 2022.
Under the leadership of President John Mahama, who assumed office at the end of last year, the government has implemented fiscal reforms to curb deficits and stabilize the economy. These measures have bolstered investor confidence, leading to a significant appreciation of the Ghanaian cedi, which has risen by 43% this year, making it the second-best-performing currency globally after the Russian ruble.
Financial institutions have taken note of Ghana's progress. Barclays Plc anticipates that Ghana will achieve its debt-to-GDP target of below 55% this year, three years ahead of the IMF's 2028 deadline. Samir Gadio, head of Africa strategy at Standard Chartered Plc, remarked, “The recent bond outperformance has been supported by an improved external position. The cedi rally has likely underpinned bonds, as this should help lower debt ratios.”
Kato Mukuru, head of research and CEO of Emerging and Frontier Capital, succinctly stated, “Simply put, Ghana is back,” reflecting the positive sentiment surrounding the country's economic recovery.
Ghana's resurgence in the bond market underscores the impact of sound economic policies and fiscal discipline. As the country continues on this trajectory, it sets a compelling example for other emerging markets navigating post-default recoveries.
READ ALSO: What Are Bonds: A Beginner’s Guide
