Ghana lawmakers approved a plan by the government to borrow up to $750 million from the African Export-Import Bank for the 2022 budget.
The vote by the nation’s hung parliament removes a major hurdle for President Nana Akufo-Addo’s government to press on with budget projects and stabilise finances after losing access to the international capital market this year.
The facility is the first part of the $1 billion in loans that the government’s looking to wind up this month for the budget. Lawmakers are still studying the second part, syndicated loans worth $250 million from other international banks, Kwaku Kwarteng, chairman of the finance committee in parliament, said by phone.
The loan proceeds are expected to make room for West Africa’s second-biggest economy to reduce domestic borrowing and put it in a stronger position to support the local currency, which has lost 25.6% of its value to the dollar this year, making it Africa’s worst performer.
Ghana reversed course to seek a funded program with the International Monetary Fund earlier this month after a decision early in the year to cut budget expenditures by as much as 30% failed to stem a sell-off in its international bonds.
The yield on Ghana dollar bonds maturing in 2032 declined 62 basis points on Wednesday to 21.2%. The premium investors demand over US Treasuries to hold Ghana debt currently stands at 1,894 basis points, according to JPMorgan Chase & Co. indexes, effectively locking the world’s second-biggest cocoa producer out of the Eurobond market.
Ghana’s recent debt woes were caused by a sweeping clean-up of the banking sector, energy-sector loans, the impact of the coronavirus pandemic and the fallout from Russia’s invasion of Ukraine, driving its debt ratio to 78% of gross domestic product at the end of March from 62.5% five years ago. The country hopes to receive about $1.5 billion from the IMF program to enhance the home-grown policies it is already implementing.