Ghana's Debt Levels Still Pose High Distress Risk Despite Being Sustainable

The International Monetary Fund (IMF) has assessed Ghana’s public debt as sustainable but cautioned that the country remains at high risk of debt distress in the short term, due to continued fiscal pressures and near-term breaches of debt sustainability thresholds.

This assessment was made in the Fund’s 4th Review under the Extended Credit Facility (ECF) programme, where it noted that the sustainability outlook is largely underpinned by the ongoing external debt restructuring and a macroeconomic framework that incorporates significant progress on fiscal and debt measures.

According to the IMF, its baseline scenario takes into account the recent restructuring of domestic debt, the agreement reached with Ghana’s Official Creditor Committee (OCC) on bilateral debt treatment, and the recently concluded Eurobond exchange. These developments, the Fund explained, are consistent with Ghana’s broader debt restructuring strategy and uphold the principle of comparability of treatment (CoT) for external commercial creditors.

“Ghana’s public debt is assessed to be sustainable under the assumption that external debt restructuring is completed in line with programme parameters,” the Fund stated. However, it emphasized that Ghana remains classified as being at a high risk of debt distress, due to short-term breaches in key Debt Sustainability Analysis (DSA) indicators.

Despite this, the IMF projects that Ghana will move to a moderate risk of debt distress by the end of 2028, as all relevant debt metrics are expected to fall below their respective thresholds under the baseline scenario. The completion of debt restructuring, combined with ongoing fiscal consolidation efforts, is expected to play a central role in this projected improvement.

The review also highlighted that Ghana’s exceptional financing gap has been closed, and the country’s international reserves are projected to reach a comfortable level of 3.0 months of import cover by the end of the ECF programme.

Fiscal Slippage in Election Year

While the overall debt outlook shows signs of stabilisation, the IMF raised concerns about Ghana’s recent fiscal performance, especially in the lead-up to the 2024 general elections. The Fund noted a significant deterioration in fiscal discipline during this period, despite relatively stable revenue inflows.

Provisional fiscal data for 2024 indicated a sharp widening of fiscal imbalances, with a primary deficit on a commitment basis reaching 3.3% of GDP, in contrast to the programme’s target of a 0.5% surplus. This shortfall was mainly attributed to a substantial accumulation of payables, tentatively estimated at 2.6% of GDP.

The Fund’s report underscores the importance of maintaining strict fiscal discipline going forward, particularly to preserve the gains made under the ECF programme and to support the ongoing debt restructuring process.

Ghana is currently implementing a $3 billion ECF arrangement with the IMF, aimed at restoring macroeconomic stability, anchoring debt sustainability, and fostering inclusive growth. The programme has already enabled the country to unlock significant budget support and improve investor confidence.

In conclusion, while Ghana’s public debt is now considered sustainable following recent restructuring milestones, the country remains vulnerable to external shocks and domestic fiscal slippages. The IMF has urged Ghanaian authorities to continue with strong reform implementation, debt management, and fiscal responsibility to ensure long-term debt sustainability and macroeconomic resilience.