IFS Cautions Ghana Against Hastily Returning to International Bond Market
The Institute for Fiscal Studies (IFS) has issued a strong warning to the Ghanaian government, urging restraint in its plans to return to the international bond market. The economic think tank emphasized the need for a more sustainable approach to debt management, highlighting the risks associated with excessive reliance on external borrowing.
Ghana has experienced two major debt crises since 2000, largely due to its dependence on external financing. Dr. John Kwakye, Director of Research at IFS, stressed that repeated cycles of borrowing from the international market have exacerbated fiscal instability and weakened the country’s economic resilience.
He cautioned that Ghana’s past failures to properly manage its debt stock have contributed to high debt-servicing costs, currency depreciation, and economic shocks. A return to the Eurobond market without first stabilizing the country’s fiscal position could lead to another cycle of unsustainable debt.
Developing Domestic Financial Markets
The IFS recommends a shift toward strengthening Ghana’s domestic financial markets as an alternative to over-reliance on external borrowing. The institution argues that a well-functioning domestic capital market would:
✅ Provide a sustainable and cost-effective source of financing.
✅ Reduce Ghana’s exposure to global financial fluctuations.
✅ Enhance financial sovereignty by reducing dependence on foreign lenders.
In contrast, a rushed return to international bond issuance could expose the economy to high borrowing costs and exchange rate risks, especially as global interest rates remain unpredictable.
Lessons from Other African Nations
Ghana is not alone in facing the challenges of external debt dependency. Many African nations struggle with low domestic savings and underdeveloped capital markets, forcing them to seek external funds at high costs. However, countries that have successfully developed their local financial markets have demonstrated greater economic resilience and stability.
A Call for Strategic Debt Management
The IFS urges the government to prioritize fiscal discipline, revenue mobilization, and investment in local capital markets before considering a return to the Eurobond market. Without these measures, Ghana risks falling back into debt distress, undermining long-term economic growth.
As Ghana navigates its post-crisis economic recovery, policymakers must weigh the risks of external borrowing against the benefits of self-sufficient financing to ensure a stable and prosperous future.
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