By Nana Karikari, Senior Global Affairs Correspondent
The International Monetary Fund has upgraded Ghana’s debt sustainability rating from high to moderate risk of debt distress. This decision follows a sustained improvement in the nation’s debt trajectory. During the fifth review of the Extended Credit Facility, the IMF noted that Ghana’s debt indicators have now fallen below their respective thresholds.
The fund had previously applied judgment to maintain a high-risk rating due to uncertainties surrounding the exchange rate and global gold prices. With clearer fiscal prospects and ongoing macroeconomic stability, the IMF has opted to align its rating with the mechanical signal of the debt data. Despite this positive shift, officials cautioned that the fiscal space regarding the external debt-service-to-revenue ratio remains constrained.
Persistent vulnerabilities in a shifting market
While the upgrade signals progress, the IMF maintains that debt vulnerabilities remain elevated. The institution emphasizes that the country’s debt dynamics are highly sensitive to external shocks. This sensitivity is primarily driven by Ghana’s heavy dependence on commodity exports, particularly gold.
The IMF report highlights that stress tests illustrate significant dangers from market volatility. The fund stated, “The DSA highlights that debt dynamics remain sensitive to external shocks given Ghana’s reliance on gold and other commodity exports.”
Also, the exchange rate serves as a primary transmission channel for economic instability due to the substantial portion of debt denominated in foreign currency. The fund noted, “The exchange rate remains a key transmission channel, given the substantial share of FX-denominated external debt and non-resident holdings of domestic debt. Contingent liabilities represent another key source of downside risk: fiscal risks from the energy sector, financial sector recapitalization needs, and quasi-fiscal activities remain particularly salient.”
To mitigate these threats, the IMF advocates for continued structural reforms, diversified exports, and flexible exchange rate policies. The fund also stressed that “completing restructuring negotiations with residual external commercial creditors and signing the remaining bilateral agreements also remain a priority.”
Managing financing needs and domestic debt
Ghana faces a challenging period ahead regarding its gross financing needs. The IMF projects these requirements will peak above 16 percent of Gross Domestic Product by 2028. This pressure is compounded by the concentration of maturities linked to the Domestic Debt Exchange Programme during the 2027-2028 window.
The country’s reliance on short-term treasury bills has created additional exposure for financial institutions. The IMF warns that the domestic market may face limited capacity to absorb future debt issuances. To address these rollover risks, authorities are implementing a strategy to lengthen debt maturities.
The fund outlined the recovery path, stating, “A carefully calibrated debt management strategy aimed at a lengthening of maturities through a gradual scaling up of Treasury-bond issuance would help mitigate rollover risks. With IMF TA support, a strategy has been adopted to manage the 2027-28 maturity concentration, combining partial redemptions via sinking funds, buybacks, and rollover through T-bills.”
Monitoring external participation and reporting
The role of non-resident investors in the local bond market remains a focal point for the IMF. While foreign participation can provide necessary liquidity, it also introduces risks related to capital flow volatility and exchange rate pressure.
The IMF advised that “non-resident participation in the bond market is not directly restricted. While non-resident participation can help deepen the market and support financing, it also introduces risks, given secondary-market flows’ potential impact on debt sustainability and financial stability through potential capital flow volatility and exchange rate pressures.”
Consequently, the fund is calling for rigorous oversight of debt markets. It suggests that government officials must remain ready to adjust borrowing plans if capital inflows surpass prudent levels. Enhancing transparency is also essential to this strategy. The IMF recommends that public debt reporting standards be strengthened by broadening the scope of data to include quasi-fiscal activities and improving inter-agency coordination. By aligning these reports with international standards, the government can facilitate more informed and sustainable borrowing decisions. Public debt reporting standards should be strengthened by aligning compilation and dissemination with GFSM 2014 and broadening coverage to capture quasi-fiscal activities.
Navigating the path toward lasting economic resilience
Balancing growth objectives with rigorous fiscal discipline will remain critical as Ghana transitions into this new phase of debt management. Independent economic observers note that sustained institutional reforms and transparent execution will determine whether these positive macroeconomic gains translate into long-term financial stability for the broader population.
