![\"\"](\"https:\/\/www.ghanamma.com\/wp-content\/uploads\/2021\/11\/fuygb-696x464.jpg\" "\\"Finance")
As the era of cheap money draws to an end, bondholders are no longer prepared to cut Ghana any slack. <\/p>\n
Ghana\u2019s dollar bonds have slumped 10% in 10 days, moving deeper into distressed territory as investors judge that re-financing debt in the Eurobond market won\u2019t be an option when the Federal Reserve hikes rates and budget targets remain elusive.<\/p>\n
The extra premium demanded on Ghana\u2019s sovereign dollar debt jumped on Wednesday to an average of 1,105 basis points, from 683 basis points in September.<\/p>\n
It\u2019s $27 billion of foreign debt had the worst start to the year among emerging markets, extending last year\u2019s 14% loss, according to a Bloomberg index.\u00a0<\/p>\n
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Investors are questioning whether Ghana \u2014 the region\u2019s second-biggest economy \u2014 can sustain its debt levels if a surge in borrowing costs shuts it out of international markets.<\/p>\n
Government\u2019s debt climbed to 81.5% of gross domestic product at the end of last year, from 31.4% a decade ago, according to data compiled by Bloomberg.\u00a0<\/p>\n
That places Ghana among the most vulnerable credits to tighter U.S. monetary policy, despite\u00a0strong\u00a0economic growth.<\/p>\n
Welcome to the Club<\/h3>\n
This month\u2019s selloff places Ghana firmly in EM\u2019s distressed debt nations.<\/p>\n \u201cThe market has woken up to the fact that this is a country with a lot of outstanding bonds,\u201d said Kevin Daly, investment director at Aberdeen Standard Investments in London. \u201cA lot of people went into last year with overweight positions and a lot of them have started to throw in the towel.\u201d <\/p>\n The West African nation\u2019s $750 million bonds due in March 2027 fell 10 cents this month to 79.4 cents on the dollar on Thursday, sending the yield to nearly 14%. Of 14 Ghanaian dollar bonds, 13 are trading with an extra premium of at least 1,000 basis points, a level considered distressed, a Bloomberg index tracking sovereign debt showed.\u00a0<\/p>\n \u201cI don\u2019t expect them to default in 2022, as they have enough foreign-exchange reserves, but medium to longer-term, it becomes an issue as Ghana has lost access to the Eurobond market for rolling over debt,\u201d said Joe Delvaux, a portfolio manager at Amundi in London. \u201cThey have too much debt for the size of the economy and investors have lost conviction in the government\u2019s willingness to consolidate spending and take necessary measures.\u201d<\/p>\n The government\u2019s\u00a0failure\u00a0to pass a new levy on electronic money transfers through parliament in November also made investors doubt whether it has the political capital to pass revenue-raising measures in parliament or reign in spending to reduce borrowing needs.<\/p>\n The opposition to the\u00a0tax reform\u00a0and plans to end a subsidy on pharmaceutical and vehicle imports will make it hard for the government to meet this year\u2019s budget deficit target of 7.4%, down from 12.1% last year.\u00a0 <\/p>\n \u201cThere\u2019s no appetite for a new Ghana issuance at this stage and probably won\u2019t be until the government has consolidated its public finances more meaningfully,\u201d said Carlos de Sousa, who helps oversee a $3.8 billion developing nation bond fund at Vontobel Asset Management in Zurich.<\/p>\n \u2014 With assistance by Ekow Dontoh<\/em><\/p>\n <\/p>\n![\"Ghana](\"https:\/\/www.ghanamma.com\/wp-content\/uploads\/2022\/03\/1647207277_876_image-7.png\" "\\"Ghana")
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