In the wake of Ghana’s recent debt restructuring initiatives, a sense of cautious optimism mingles with concerns about the country’s economic recovery.

The Deloitte Restructuring Survey of 2024 sheds light on the sentiments within financial circles, notably highlighted by a restructuring banker’s sober assessment of the situation.

Ghana’s journey to stabilize its fiscal standing has been underscored by a dramatic rise in the public debt-to-GDP ratio, soaring from approximately 30% in 2008 to a daunting 73% by 2022, as revealed by the Deloitte report.

The government’s response was decisive; signing onto an IMF Extended Credit Facility program in 2023 was seen as a crucial step to confront mounting financial challenges exacerbated by macroeconomic strains and debt sustainability issues.

A pivotal aspect of this strategy was the completion of the Domestic Debt Exchange Program (DDEP) in February 2023.

This initiative, amounting to approximately GHS 137 billion, saw the voluntary exchange of existing domestic notes and bonds for new instruments with extended maturities and reduced coupon rates.

These measures aligned with the IMF’s prescription of structural reforms to rectify fiscal imbalances and restore macroeconomic stability over the medium to long term.

As of September 2023, Ghana’s external debt represented 57.6% of the total debt, reflecting the impact of the DDEP in significantly paring down the domestic debt stock.

The collective efforts of consolidating public finances, the DDEP, and ongoing external debt restructuring led to a noticeable reduction in total public debt, contracting from around 73% of GDP in December 2022 to approximately 66% by September 2023.

However, amidst these developments, a note of caution emerged from a restructuring banker, who anticipates a muted economic recovery following the rescheduling of debt repayments to a period spanning three to five years.

“The way the Government has rescheduled the repayment of the debts to between three and five years, I don’t expect a major recovery in terms of the economy.”
Restructuring banker

This observation underscores lingering apprehensions regarding the pace and vigor of Ghana’s economic bounce-back.

Despite these reservations, Ghana’s commitment to fiscal consolidation remains unwavering. This commitment is exemplified by tighter monetary policies and a suite of structural reforms addressing tax policy, revenue administration, public financial management, and sector-specific challenges in energy and cocoa.

According to the survey, “Key economic indicators in Ghana point to an improving macroeconomic environment. Overall, GDP growth is projected to improve slightly from 2.9% in 2023 to 3.3% by the end of 2024, while average inflation is expected to decrease from 38% in 2023 to 18% in 2024.”

However, the restructuring banker’s outlook is not all upbeat.

“I am optimistic about economic growth, but with caution because lenders may not be able to support economic growth due to the high inflation.”
Restructuring banker

Strategic Shift in Ghana’s Business Landscape

The survey results highlighted the significance of operational restructuring, particularly in the context of maximizing shareholder value amidst economic challenges in Ghana.

According to the survey, cash preservation and targeted cost management are top priorities for lenders and corporate leaders, reflecting a strategic shift catalyzed by global disruptions.

“This is not simply a defensive play,” the report emphasized, noting that effective business leaders have learned critical lessons from the Covid-19 pandemic and global supply shocks.

According to C-Suite (CEO and peer executives) respondents, operational restructuring, encompassing activities such as targeted cost reduction and unlocking cash from working capital, is the most effective route to enhancing shareholder value.

This strategic emphasis on operational restructuring reflects a nuanced understanding among business leaders of the importance of adapting and optimizing resources amidst economic uncertainties, positioning companies for sustained growth and value creation.