The International Monetary Fund (IMF) has classified Ghana as a highly risk debt distress country.
The Directors of the Fund who worked on the “Article IV Consultation Document” however welcomed the fiscal adjustment envisaged in the 2021 budget, adding “fiscal consolidation is needed to address debt sustainability and rollover risks, as Ghana continues to be classified at high risk of debt distress.”
To protect the most vulnerable, the report said considerations could be given to more progressive revenue measures and a faster return to the pre-pandemic level of spending, with a shift towards social, health, and development spending.
The Directors also encouraged the timely completion of the planned audit of COVID-19 emergency spending and new expenditure arrears.
The Directors of the Fund further noted that despite the current status of Ghana, they know the country will not default in repaying its debt because of its strong track record of servicing its debts to the Fund, albeit risks to country’s capacity to repay increasing.
It however stressed that Ghana needs support from the Fund due to the uncertainty about the course of the Covid-19 pandemic and high debt vulnerabilities.
Ghana’s total public debt stock, as a percentage of GDP, increased from 76.1 per cent at the end of December 2020, to 77.1 per cent of GDP at the end of June 2021. The government has blamed the rise in debt stock on the Covid-19 pandemic, Eurobond issuance in April, contingent liabilities and front-loading of financing to meet cash flow requirements.
The Directors highlighted Ghana’s strong track record with official and commercial creditors, continued commitment to macroeconomic stability, and the nation’s view of the Fund as a trusted advisor and development partner.
They also emphasized that Ghana’s sovereign ratings remain stable and that Eurobond spreads had reverted to their pre-pandemic levels. This, in the Directors view, represents a mark of investor confidence.
“Ghana’s strong track record of servicing its debts to the Fund, the expected recovery from the pandemic [Covid-19], the commitment to fiscal discipline over the medium-term, and the potential for Ghana’s exchange rate to act as a shock absorber, all suggest that repayment risks are contained”, the Fund’s statement mentioned.
