Can Ghana borrow again without breaking the cedi?

Ghana stands at a critical juncture in its macroeconomic management, facing a fundamental tension between financing its development agenda and protecting currency stability. The West African nation's ability to access international capital markets—essential for infrastructure investment and fiscal consolidation—increasingly depends on whether policymakers can prevent further cedi depreciation amid mounting external borrowing requirements.

The backdrop to this challenge is Ghana's ongoing post-IMF adjustment period. Following its 2023 debt restructuring agreement with bilateral creditors and bondholders, the country has regained some market access. However, this reprieve remains fragile. The cedi has faced persistent depreciation pressures, losing approximately 25-30% of its value against the dollar over the past three years. For European manufacturers, retailers, and infrastructure investors operating in Ghana, this volatility directly impacts operational costs, profit repatriation, and project valuations.

The core dilemma is structural: Ghana requires approximately $2-3 billion annually in external financing to fund capital projects, service debt obligations, and rebuild foreign exchange reserves. Yet each major external borrowing episode—whether Eurobonds, multilateral loans, or bilateral funding—can trigger market concerns about currency sustainability, particularly if proceeds don't generate sufficient foreign exchange inflows through export revenue or investment returns.

Recent IMF negotiations have emphasized domestic revenue mobilization as the pathway forward, with Ghana targeting a primary fiscal surplus by 2024. This approach aims to reduce reliance on external borrowing, thereby easing depreciation pressures. However, implementation remains uneven. Tax revenue collection improvements have been offset by subsidy pressures on fuel and electricity, limiting fiscal space. For investors, this creates uncertainty regarding the government's commitment to orthodox stabilization measures.

Currency depreciation presents a double-edged sword for European stakeholders. On one hand, depreciation erodes returns on naira-denominated investments and complicates dividend repatriation—a critical concern for European multinationals in sectors like FMCG, telecommunications, and financial services. On the other, a weaker cedi makes Ghana's export sectors, particularly cocoa and refined petroleum products, more competitive internationally, potentially benefiting European companies operating in commodity value chains.

The critical variable determining Ghana's borrowing sustainability is the composition of capital inflows. Debt-financed borrowing that funds recurrent spending or inefficient infrastructure projects presents currency risks, as it creates obligations without corresponding foreign exchange generation. Conversely, borrowing that finances productive infrastructure—ports, energy, digital networks—can catalyze export-oriented investment and increase foreign exchange earnings, supporting cedi stability.

Market signals suggest cautious optimism, but fragility persists. Ghana's Eurobond yields have moderated from crisis peaks but remain elevated compared to regional peers, reflecting lingering credibility concerns. Ratings agencies maintain subdued outlooks despite stabilization progress.

For European investors, the answer to whether Ghana can borrow sustainably without breaking the cedi hinges on policy consistency and private sector dynamism. The government must simultaneously demonstrate credible fiscal discipline while creating conditions for export-led growth that generates natural foreign exchange buffers. Without concurrent improvements in productivity and competitiveness, even successful borrowing will ultimately pressure the currency.