Ghana remains trapped in debt distress, as disclosed by the International Monetary Fund (IMF) in its recent Staff Report on Ghana’s “2023 Article IV Consultation.” Despite the ongoing debt restructuring efforts, the IMF highlighted that the attached Debt Sustainability Analysis (DSA) indicates substantial and prolonged breaches of standard thresholds.
The Fund emphasized that Ghana’s debt remains unsustainable, echoing the findings of the DSA published in May 2023. The report comes in the aftermath of a meeting held on October 6, 2023, between a team from the IMF and the Government of Ghana, focusing on policies supporting the IMF arrangement under the Extended Credit Facility (ECF) program.
Background:
In 2023, Ghana initiated a debt restructuring program as a prerequisite for securing the IMF program, with the aim of bringing the country’s debt to sustainable levels. The comprehensive debt restructuring strategy aimed to mitigate the risk of debt distress under the IMF-World Bank Debt Sustainability Framework for low-income countries (LIC-DSF). The plan targeted external debt service relief and a reduction in domestic financing pressures.
IMF’s Insight into Ghana’s Debt Sustainability:
The IMF underscored that Ghana’s macroeconomic framework forms the basis of the Debt Sustainability Analysis, with the staff baseline scenario aligned with the trajectory envisioned under the Fund-supported program. The objective is to restore macroeconomic stability and debt sustainability in the medium term.
The report highlighted that Ghana’s fiscal and external positions significantly deteriorated due to the COVID-19 pandemic, global financial conditions, and the conflict in Ukraine.
These external shocks, coupled with existing fiscal and debt vulnerabilities, resulted in a surge in public and external debt.
Consequently, Ghana lost international market access in late 2021, and the macroeconomic situation became more challenging in 2022, with substantial losses.
According to the IMF, the economic slowdown and large fiscal deficits prompted a surge in public debt from 63.0% of GDP in 2019 to 93.3% of GDP at the end of 2022.
Domestic debt reached 50% of GDP in 2022, with 16.0% held by the Bank of Ghana, while public external debt stood at 43.3% of GDP.