IMF Upgrades Ghana’s Debt Distress Risk to Moderate
By Praisebell Rosemond Larbi
The International Monetary Fund (IMF) has upgraded Ghana’s risk of debt distress from “high” to “moderate”, citing a sustained improvement in the country’s debt trajectory and greater macroeconomic and exchange-rate stability.
The decision was contained in the IMF’s latest Country Report on Ghana following the fifth review under the Economic Credit Facility (ECF) programme.
According to the Fund, all of Ghana’s key debt indicators have fallen below their respective thresholds. At the previous review, however, IMF staff retained the country’s high-risk classification despite the improved indicators, citing uncertainty surrounding the exchange rate and gold prices.
The IMF said the continued improvement in Ghana’s macroeconomic conditions, combined with a clearer fiscal outlook, has now allowed it to remove that judgment and align the country’s assessment with the mechanical signal of the Debt Sustainability Analysis (DSA).
Despite the upgrade, the Fund cautioned that Ghana’s debt vulnerabilities remain elevated and require continued vigilance.
It noted that the country remains particularly exposed to external shocks because of its dependence on gold and other commodity exports. According to the IMF, adverse developments in export earnings or commodity prices could push both solvency and liquidity indicators above their respective thresholds for an extended period.
The exchange rate also remains a major source of risk because a significant portion of Ghana’s external debt is denominated in foreign currency, while non-residents hold a substantial share of domestic debt.
The Fund further identified contingent liabilities as another important downside risk. These include fiscal pressures from the energy sector, potential financial-sector recapitalisation needs and quasi-fiscal activities.
The IMF therefore stressed the need for Ghana to maintain fiscal discipline and pursue reforms aimed at strengthening the economy’s resilience. It also called for adequate external buffers, exchange-rate flexibility and efforts to diversify the country’s export base.
The Fund further urged Ghana to complete negotiations with its remaining external commercial creditors and conclude outstanding bilateral debt agreements.
The upgrade represents an important improvement in Ghana’s debt outlook and could strengthen investor confidence if the progress is sustained. However, the IMF’s assessment makes clear that the country is not yet out of the woods.
In particular, the Fund warned that the limited space under the external debt-service-to-revenue ratio leaves Ghana vulnerable to future shocks.
The latest assessment therefore presents a mixed picture: Ghana’s debt dynamics are improving, but maintaining that progress will depend on continued fiscal reforms, prudent borrowing, economic stability and successful completion of the country’s debt restructuring process.
