"Ghana debt moves deeper into distress as investors lose patience"

" \n Ghana debt moves deeper into distress as investors lose patience \n \n\n \n As the era of cheap money draws to an end, bondholders are no longer prepared to cut Ghana any slack. \n \n\n \n The West African nation\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. \n \n\n \n The extra premium demanded on Ghana\u2019s sovereign dollar debt jumped on Tuesday to an average 1,145 basis points, from 683 basis points in September. Its $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. \n \n\n \n <img src=\"https:\/\/www.bnnbloomberg.ca\/polopoly_fs\/1.1706903.1642051308!\/fileimage\/httpImage\/image.png_gen\/derivatives\/landscape_620\/fishing-boats-sit-on-the-waterside-right-near-commercial-buildings-on-the-city-skyline-in-accra-ghana-on-tuesday-sept-20-2016-ghana-s-central-bank-expects-mergers-and-acquisitions-among-lenders-to-increase-as-regulators-prepare-new-rules-that-will-boost-the-amount-of-cash-that-they-need-to-set-aside-photographer-ty-wright-bloomberg.png\" alt=\"Fishing boats sit on the waterside, right, near commercial buildings on the city skyline in Accra, Ghana, on Tuesday, Sept. 20, 2016. Ghana's central bank expects mergers and acquisitions among lenders to increase as regulators prepare new rules that will boost the amount of cash that they need to set aside. Photographer: Ty Wright\/Bloomberg\"\/> \n \n\n \n Investors are questioning whether Ghana -- the region\u2019s second-biggest economy -- can sustain its debt levels if a surge in borrowing costs shuts it out of international markets. Government 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. \n \n\n \n That places Ghana among the most vulnerable credits to tighter U.S. monetary policy, despite strong economic growth. \n \n\n \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 \n \n\n \n Read: Prolonged inflation could weaken reinsurers\u2019 credit profiles \n \n\n \n The West African nation\u2019s $750 million bonds due in March 2027 fell 10 cents this month to 78.6 cents on the dollar on Tuesday, 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. \n \n\n \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. \n \n\n \n \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 \n \n\n \n The government\u2019s failure to 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. \n \n\n \n The opposition to the tax reform and 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. \n \n\n \n \u201cThere\u2019s no appetite for a new Ghana issuance at this stage and probably won\u2019t be until the government has consolidated is 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. \n "

"Ghana debt moves deeper into distress as investors lose patience"

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