2022 has been a very tough year for almost everyone, but even more so for Ghanaians. The most recent blow served to investors pretty much sums up how bad it’s been for them.

Last week, the Ghanaian government asked its domestic investors to accept losses on interest payments on local bonds.

Key takeaways:

  1. Ghana asked local investors to accept losses on interest payments attached to its domestic bonds. 

  2. As we saw with Russia in 1998, a domestic default could trigger a banking crisis and economic contraction. 

  3. The $3 billion IMF bailout will help Ghana bounce back in the future after a challenging 2023. 


Essentially, investors who trusted the nation's sovereignty by investing in its local bonds will lose returns on these investments because Ghana can no longer afford to make interest payments.

The debt-ridden country’s default on domestic loans and a potential 30% haircut on external loans qualified it for a $3 billion International Monetary Fund (IMF) bailout. This bailout adds a layer of hardship to what Ghanaians have faced all year. Inflation skyrocketed in 2022 to 40.4% in October (versus 13.9% in Jan 2022). This increase necessitated several interest rate hikes—about 1,000 basis points in 2022 to 27% as of November.

In addition, the Ghanaian cedi lost over 50% of its value against the dollar to become 2022’s worst-performing currency. And now, it faces this debt restructuring (i.e. changing the terms of a loan to make it easier to pay back).

But what lies ahead for the Ghanaian economy and its government in 2023? Before we delve in, it’s necessary to assess the impact of default on investors.

First came the shock

Ghana’s restructuring plans came as a surprise to investors. As recently as October, Ghanaian President Nana Akufo-Addo had reassured investors that their funds were safe.

But, in a complete turnaround, Finance Minister Ken Ofori-Atta announced that the government would exchange its sixty local