Introduction
Ghana’s macroeconomic landscape is undergoing a fundamental reset. After navigating a turbulent period of high inflation, fiscal strain, and currency depreciation, the economy is now witnessing a notable recovery. A combination of falling inflation, a strengthening cedi, and reinforced fiscal discipline has driven a sharp decline in domestic bond yields. The turnaround in investor sentiment is not coincidental—it reflects the government’s re-anchored commitment to macroeconomic stability.
Yields on 91-day Treasury bills have dropped from 25–28% in late 2024 to around 14–15% by June 2025. Similarly, the six-year local-currency bond yield has declined to 18.93%, marking its strongest performance since issuance. This rapid compression signals renewed market confidence and opens up fiscal space, easing the government’s domestic borrowing burden.
At the centre of this market re-pricing is disinflation. After peaking above 23% in early 2025, headline inflation has eased for six consecutive months, falling to 13.7% in June—the lowest since December 2021. Food inflation, which heavily influences household welfare, has also declined sharply to 16.3%, reflecting the impact of prudent macroeconomic policies and better-targeted fiscal reforms.
The currency has also staged a dramatic comeback. The Ghana cedi appreciated by approximately 42%, from a low of GH₵16.4/USD in November 2024 to GH₵10.3/USD by mid-2025. This rebound was supported by strong gold and cocoa export receipts, targeted IMF disbursements, and calibrated foreign exchange interventions by the Bank of Ghana. The result has been a reduction in currency-risk premia and lower pressure on domestic interest rates.
Equally significant has been the central bank’s policy posture. Following a 100-basis-point hike in March, the policy rate was held at 28% in May, despite easing inflation. Governor Maxwell Opoku-Afari (Acting) signalled that, provided inflation continues its downward trajectory, a gradual policy normalization could begin in 2026. This forward guidance has anchored market expectations, contributing to the decline in yields even ahead of any actual rate cuts.
On the fiscal front, the March 2025 “shock therapy” budget introduced by Finance Minister Cassiel Ato Forson marked a turning point. The budget featured steep cuts to subsidies—particularly in the cocoa and energy sectors—the elimination of inefficient tax waivers, and an aggressive revenue-mobilisation drive. The government’s revised targets include reducing inflation to 11.9% by December, achieving at least 4% GDP growth, and narrowing the fiscal deficit to 3.1% of GDP.
Crucially, these efforts are anchored in Ghana’s IMF-supported programme. A staff-level agreement in April 2025 unlocked US$370 million in budget support, while earlier disbursements under the US$3 billion Extended Credit Facility reinforced structural reforms, debt sustainability benchmarks, and fiscal transparency. These include targets for a 1.5% primary surplus and a commitment to end monetary financing of the deficit by the Bank of Ghana.
The combined effect of lower inflation, a stronger cedi, disciplined central banking, and credible fiscal policy has driven the recent drop in yields. However, history reminds us that without institutionalised reforms, such gains can be fleeting.
Historical Antecedents: Lessons from Ghana’s Policy Cycles
Ghana’s current macroeconomic trajectory is not without precedent. In the late 2000s, under President John Atta Mills, the country faced similar macro imbalances—high inflation, a weak currency, and rising borrowing costs. Through measured fiscal restraint and improved debt management, inflation fell from 18% to 8.4% by 2011, and the deficit narrowed from nearly 14.5% of GDP in 2008 to just 2% by 2011. This stability brought relief to the bond market and improved investor appetite.
However, the gains proved unsustainable when fiscal discipline eroded in the following years. Rising wage bills, subsidy overruns, and election-year spending led to renewed deficits and rising inflation—prompting a return to the IMF by 2015.
More recently, the 2022–2023 period exposed deep structural vulnerabilities. The confluence of post-pandemic fiscal expansion, external shocks, and global interest rate hikes led to surging inflation above 37%, a cedi crash to over GH₵16/USD, and T-bill rates peaking at 36%. Investor panic prompted Ghana to suspend Eurobond repayments and initiate debt restructuring under the IMF.
Only through aggressive fiscal consolidation, IMF engagement, and domestic debt re-profiling did stability begin to return in late 2024. These past cycles reinforce a clear message: Ghana’s bond market is acutely responsive to credibility signals. Sustained disinflation, a stable cedi, and lower yields are only durable if anchored in legally backed and politically protected reforms.
Making the Momentum Last
To entrench this emerging stability, Ghana must take decisive steps to institutionalise fiscal discipline and preserve monetary credibility.
Codify Fiscal Discipline: Under the IMF programme, Ghana targets a primary surplus of 1.5% of GDP by the end of 2025, reversing from a primary deficit of over 3% in 2024. Enshrining this in law—alongside enforceable debt ceilings and transparent audit mechanisms—will enhance investor confidence and reduce fiscal risk premia.
Diversify Fiscal Tools: Consolidation should not rely solely on expenditure cuts. The tax base must be broadened through digital compliance, review of tax exemptions, and strategic investment in sectors that generate sustainable revenue. Historical experience suggests that phasing out costly energy subsidies—estimated at 1–3% of GDP—can free up space for targeted social spending and infrastructure development.
Clarify Communication: Fiscal transparency must be elevated through biannual updates tied to IMF review milestones and Ghana’s own fiscal calendar. Clear communication of deficit trajectories, revenue mobilisation outcomes, and reform progress will help reduce uncertainty and anchor market expectations.
Safeguard Monetary Credibility: The Bank of Ghana must resist premature easing. A careful, data-driven approach to policy-rate normalization—triggered only by sustained disinflation and FX stability—will preserve recent gains in real interest rates and capital inflows. Predictability in the BoG’s actions enhances its credibility and ensures bond markets remain anchored.
These four pillars are mutually reinforcing. Transparent fiscal targets strengthen monetary credibility. Revenue reforms support disinflation. And credible communication ensures markets stay informed, responsive, and stable.
Conclusion
Ghana’s current macroeconomic reset is as encouraging as it is hard-won. Falling inflation, an appreciating cedi, and easing borrowing costs mark a new phase of opportunity. But history warns against complacency. Without institutional safeguards, the progress seen in 2025 could unravel.
Now is the time to lock in reforms—not merely to please bond markets, but to secure a stable macroeconomic foundation for job creation, social investment, and inclusive growth. If managed wisely, Ghana can reposition itself not as a serial borrower, but as a credible sovereign committed to fiscal responsibility and long-term development.
The writer, Professor Eric F. Oteng-Abayie, PhD, is a lecturer at the Department of Economics, KNUST.
