Financial Analyst and Banking Consultant, Dr. Richmond Atuahene is proposing six (6) policy recommendations for the government to implement before considering a re-entry into the domestic bond market.
Government is already planning a re-issuance of domestic bonds this quarter after the market was suspended as a result of the domestic debt exchange program. (DDEP). This, the government says will enable it secure long-term financing for its policies rather than relying on short-term financing.
But Dr. Atuahene opposes the move justifying that a return now is very premature.
He believes a re-entry now into the domestic bond market could spell disaster for the already country’s fragile economic recovery. He further states that investors who endured the painful painful haircut has not recovered and hence staging a quick comeback isn’t the right policy path.
The financial analyst further states it could also skyrocket borrowing costs, induce capital flight, and exacerbate Ghana’s economic woes.
In his analysis, the best time for the government to re-issue domestic bonds is 2028. Prior to that, he recommends six policy conditions that the government must meet before staging a comeback in the market.
In a research paper on the subject matter titled, “The Politics of Government re-entry into Domestic Bond Market: ‘Is It a Myth or Reality?” and copied to The High Street Journal, the financial analyst recommends the following;
Restore Debt Sustainability and Improve Debt Risk Ratings
Dr. Atuahene proposes that government must work to restore debt sustainability and bring Ghana’s debt risk rating to moderate by 2028. This requires improving weak debt indicators and ensuring that the Present Value (PV) of total debt-to-GDP and external debt service-to-revenue ratios reach 55% and 18%, respectively.
Debt sustainability assessments (DSAs) help determine a country’s ability to handle debt and are used by the IMF and World Bank for policy recommendations and financing decisions. The Debt Sustainability Framework (DSF) categorizes countries into low, moderate, high risk, or in distress, based on historical performance, macroeconomic outlook, and external factors. Strong-performing economies can handle higher debt thresholds, while weaker ones face stricter limits.
He says a forward-looking approach, including prudent fiscal and exchange rate policies, is crucial to ensuring long-term debt sustainability without excessive reliance on external financing.
Ensure Macroeconomic Stability
The government, he says must prioritize macroeconomic stability before adding more debt to Ghana’s already high debt-distressed economy. Stability is crucial for restoring investor confidence in the domestic bond market, which was severely impacted after the Domestic Debt Exchange Programme (DDEP) in December 2022.
To achieve long-term macroeconomic stability, Ghana must maintain moderate inflation, low exchange rate volatility, sustainable fiscal deficits, and manageable public debt levels. A strong and stable financial sector, supported by sound monetary and fiscal policies, is essential for fostering private sector growth and boosting economic development.
Prudent macroeconomic policies, including low inflation, stable currency, and reduced fiscal deficits, will enhance financial sector stability and improve credit quality.
Strengthen Domestic Revenue
It is also the view of Dr. Atuahene that the government strengthen its domestic revenue mobilization by increasing tax revenues from large companies, High Net-Worth Individuals (HNWIs), and digital property taxes while ceasing tax waivers and enforcing existing tax laws, especially on transfer pricing before staging a comeback on the domestic bonds market. He says Ghana must diversify its tax revenue streams by implementing equitable property taxes and HNWI taxes, as successfully done in Rwanda, Kenya, and Uganda, which have achieved higher tax-to-GDP ratios (28%).
To boost property tax collection, the government and MDAs must urgently resume property rate collection and address challenges with the unified tax platform. An effective property tax IT system must integrate property identification, valuation, billing, payment, compliance monitoring, and taxpayer services while ensuring coordination across government agencies.
Robust Fiscal Framework
The government must develop a robust fiscal framework to ensure fiscal sustainability and policy predictability. A strong framework includes long-term fiscal targets, fiscal rules, institutions, and budget procedures to guide political decisions on acceptable debt levels. Some countries control deficits and debt through procedural rules, allowing policymakers flexibility while promoting fiscal responsibility.
To curb Ghana’s rising Debt-to-GDP ratio, a constitutional debt cap should be introduced. Better coordination between fiscal and monetary authorities is also essential for stability. Countries with fiscal rules preventing excessive debt have more effective central banks, which can manage deficits through interest rate adjustments.
A well-structured fiscal framework signals commitment to fiscal responsibility, strengthens macroeconomic management, and enhances democratic accountability. To resolve the debt crisis, the government must implement fiscal reforms, including reducing government spending, increasing tax revenues, and improving debt management practices.
Review Revenue Streams from the Mining Sector
The government should urgently review revenue streams from the mining sector to enhance national resource mobilization. Despite the sector’s dominance and the global commodity boom, its contribution to government revenue and national development remains inadequate due to excessive incentives for mining companies. These incentives, such as capital allowances, VAT exemptions, non-payment of capital gains tax, and low royalty rates, significantly limit domestic revenue generation.
The Minerals and Mining Act, 2006 (Act 703) and its 2015 Amendment allow mining companies to negotiate stability and development agreements, ensuring they are shielded from adverse legislative changes for up to 15 years. These agreements also allow firms with over $500 million in investments to customize their tax and royalty obligations, reducing the government’s earnings.
To increase the mining sector’s contribution to the national economy, he callson the government to re-examine the mining fiscal regime and investment agreements.
He further calls for review the Minerals and Mining Act, 2006, and the 2015 Amendment to ensure better revenue mobilization and implement production-sharing agreements (PSAs) to increase state participation and revenue.
Enhance Fight Against Corruption
Corruption threatens Ghana’s democracy and economic growth, requiring strong legal action. The government should classify corruption as a national crime, establish special courts, and grant the Office of the Special Prosecutor full independence. Adopting a model like Nigeria’s EFCC will enhance the fight against financial crimes.
Strict penalties, including long prison terms and asset confiscation, should deter corrupt practices, while blacklisting unethical multinational corporations and leveraging media exposure will boost transparency. Political leaders must set an example by enforcing ethical governance and accountability.
With Ghana losing nearly $3 billion annually to corruption, a comprehensive strategy combining enforcement, prevention, and public awareness is crucial. Strengthening anti-corruption laws and institutions, as seen in Singapore and China, will help restore integrity and drive national development.
Between now and 2028, Dr. Richmond Atuahene says the government must rather focus and prioritize these policy interventions. This, he believes will put the economy on the right pedestal before the reintroduction of domestic bonds.
