Ghana’s re-entry to the domestic bond markets after what many have described as a painful Domestic Debt Exchange Programme (DDEP) has become a subject of intense debate.
For proponents, the conditions are ripe for the government to enter the market again and borrow. Key reasons cited to back the re-entry include fiscal sustainability, investor confidence and economic growth, developmental financing, reduced external reliance, and market deepening and inclusion.
However, other analysts critical of the move are citing various reasons why it could be a risky decision.
Banking and corporate governance expert Dr. Richmond Atuahene is warning that while re-entry may seem necessary, the risks, if not carefully managed, could outweigh the benefits.
In an in-depth article on the subject, Dr. Atuahene outlined a number of reasons why the country should be rethinking the decision.
A New Debt Trap
At the heart of his concern is the cost of borrowing. After restructuring debt under the Domestic Debt Exchange Programme (DDEP), Ghana may have to offer high interest rates to attract investors again. That means the country could end up spending a large chunk of its revenue just servicing debt, leaving little for development.
The Crowding Out Risk
There is also the issue of crowding out. When the government borrows heavily from local banks, those banks may prefer lending to the state instead of businesses. The result? Small businesses struggle to access loans, slowing job creation and economic growth.
Premature Timing
Timing is another major worry. According to Dr. Atuahene, returning to the market too soon, especially after investors took losses during the restructuring, could be seen as premature. This may weaken investor confidence and make borrowing even more difficult or expensive.
Risk of New Debt Accumulation
He also warns of a return to old habits. Ghana’s underlying problem, spending more than it earns, has not been fully fixed. Without strict discipline, new borrowing could simply restart the cycle of debt accumulation that led to the crisis in the first place.
Fragile Financial Sector
The financial sector itself remains fragile. Banks are still recovering from the impact of the DDEP, and another wave of heavy government borrowing could put additional strain on them.
Geopolitical Tensions
Beyond Ghana’s borders, global risks add another layer of uncertainty. Rising geopolitical tensions, including major power rivalries and supply chain disruptions, could reduce investor appetite for emerging markets like Ghana. This means raising funds may not only be harder but also more expensive.
Repayment Pressure
There is also concern about future repayment pressure. With large debt obligations expected around 2027–2028, taking on new debt now could create refinancing risks later, potentially setting the stage for another crisis.
Ultimately, Dr. Atuahene cautions that if borrowed funds are not invested in productive sectors that generate returns, but instead used for day-to-day government spending, Ghana risks becoming what he describes as a “serial defaulter.”
The Bottomline
The banking and financial consultant emphasizes that Ghana’s re-entry to the domestic bond market is not the problem. However, doing so too quickly, too expensively, and without discipline is a major threat to the country’s economic recovery and debt overhang.
