Returning to Capital Market must be done with caution

 The announcement by the Minister of Finance, Dr Cassiel Ato Baah Forson, during the presentation of the Mid-Year Budget Review last Thursday that government intends to resume activities on the domestic capital market, specifically the bond market, to raise funds to finance develop­ment projects, is a good signal to the country’s economic recovery.

According to Dr Forson, the primary objective of reopening the bond market is to raise funds to support the budget deficit.

Also, the move aims to devel­op a more competitive primary market that can generate the required volume and favourable pricing to help government reduce borrowing costs.

As part of the initiative, the Finance Minister stated that beginning August 2025, gov­ernment will commence the selection of new book runners, banks and investment dealers with the capacity to ensure wider market distribution and advise on pricing and strategy.

Encouragingly, Dr Forson also noted that government has start­ed implementing “an effective and efficient liability manage­ment programme to reduce embedded risk” in the country’s debt portfolio.

He explained that the pro­gramme aims to reduce debt service costs, mitigate refinanc­ing or rollover risks, and extend bond maturities to ease near-term refinancing pressures.

In this regard, government will carefully sequence the issuance of benchmark securi­ties and prioritise longer-dated tenors to help establish a stable yield curve.

While these measures are laudable and offer a level of assurance, The Ghanaian Times believes it is necessary to exer­cise caution, especially in view of recent concerns raised by the World Bank.

The Bank has advised against premature re-entry into the capi­tal markets, particularly the inter­national capital market, as such a move could derail the macroeco­nomic gains achieved under the ongoing International Monetary Fund (IMF) programme.

It is worth recalling that Gha­na was effectively shut out of the international capital market in 2022, largely due to escalating public debt, rapid depreciation of the cedi, and rising inflation.

These conditions triggered a loss of investor confidence, forcing the government to turn to the IMF for a three-year $3 billion bailout programme to stabilise the economy.

The IMF-supported pro­gramme has since helped restore macroeconomic stability and rebuild investor confidence.

Therefore, any decision to re-enter the capital markets must be grounded in a firm under­standing of past missteps and a clear strategy to avoid repeating them.

The government’s inability to access external capital markets in recent years had far-reaching implications. It was compelled to rely heavily on short-term domestic borrowing, primarily through Treasury bills, at high interest rates, a practice which has continued to crowd out the private sector from access­ing funds to support business growth.

In this regard, we at The Ghanaian Times urge government to first address the root causes of Ghana’s debt sustainability challenges.

This includes enhancing domestic revenue mobilisation, curbing excessive and wasteful expenditure, and eliminating leakages in the public financial system through stronger an­ti-corruption measures.

We also stress the importance of ensuring that borrowed re­sources are channelled into pro­ductive investments, particularly infrastructure and development projects that can repay them­selves over time, and not into recurrent or consumption-relat­ed spending.

It is reassuring that Dr Forson acknowledged that the country is “not yet out of the woods” and therefore needs to be cautious in its economic decision-making.

The Finance Minister’s deci­sion not to request additional funding during the Mid-Year Re­view is commendable and shows a commitment to expenditure control and the macroeconom­ic targets set out in the 2025 Budget.

Ghana has faced similar eco­nomic challenges in the past and overcome them through prudent management. With discipline, foresight, and careful planning, we believe the country can navigate the current difficulties and return to full participation in the capital markets on stronger footing.