Ghana Debt Market Faces Refinancing Shock

By Tina Moses Sam
Ghana’s domestic debt market is showing signs of recovery after a significant decline in interest rates since early 2025.
However, new analysis suggests that refinancing pressures and renewed market tensions could soon test the stability of the country’s financial system.
According to Databank Research, interest rates have declined sharply by 23.7 percent since January 2025, reflecting improved economic policy signals and stronger fiscal expenditure controls. The drop in rates has created expectations for further reductions in lending rates, offering some relief to businesses and borrowers who have faced high borrowing costs in recent years.
Despite the improvement, analysts warn that the progress could face new challenges as the government continues to manage a large domestic debt burden and prepares for significant refinancing obligations over the next few years.
The Databank Research report noted that Ghana experienced a notable easing of interest rates throughout 2025 as macroeconomic conditions gradually improved.
This decline was supported by tighter fiscal management and clearer policy communication, which helped restore some investor confidence following the turbulence caused by Ghana’s recent debt restructuring programme.
However, the report observed that the pace of easing slowed during the second half of the year. From the second quarter of 2025 to the third quarter of the same year, interest rates stabilized within a narrow range.
According to the report, “the pace of easing moderated through the second quarter of 2025 to the third-quarter of 2025, with rates stabilising within a 10.40%–10.90% corridor.”
This stabilization suggests that while the sharp drop in interest rates has ended, the market has entered a more cautious phase as investors assess future risks and fiscal developments.
Although current conditions appear relatively stable, Databank Research expects upward pressure on yields to begin emerging in early 2026.
In particular, short term interest rates may begin rising as the government increases its issuance of treasury instruments while liquidity conditions in the financial system tighten.
The report stated, “Looking ahead, we expect a gradual firming of yields in Q1’26, with short-term rates projected to rise by 50–60 basis points from quarter 4, 2025 levels, driven by increased issuance and tighter liquidity conditions.”
Analysts believe these developments could mark the beginning of a new cycle of market pressure that may intensify later in the year.
If realized, such increases could raise borrowing costs for the government and the private sector, potentially slowing investment and economic activity.
While interest rate pressures remain a concern, the report indicates that Ghana’s secondary bond market is gradually recovering after the disruptions caused by the Domestic Debt Exchange Programme.
Databank Research expects this recovery to continue into 2026 as fiscal discipline improves and trading activity increases.
It explained that the secondary bond market will sustain its recovery trajectory into 2026, supported by improving turnover and reinforced fiscal discipline.
The improvement in trading activity reflects renewed investor engagement in the domestic bond market. As market liquidity improves, analysts believe investors may become more willing to participate in new bond issuances.
One of the most significant challenges facing Ghana’s debt market in the coming years is the large volume of domestic debt obligations that will mature between 2026 and 2028.
The report revealed that Ghana will face a total domestic debt service obligation of GH¢131.8 billion during this period.