- IMF Sees Room for More Development Spending as Ghana’s Debt Outlook Improves
Ghana could still reduce public debt to the legally mandated 45% of GDP by 2034 even if the government lowers its operational primary surplus target from 1.50% to 0.50% of GDP from 2027, according to the International Monetary Fund.
The assessment points to a potentially important shift in Ghana’s post-crisis fiscal strategy, suggesting that recent debt-reduction gains may have created room for policymakers to ease the pace of consolidation without abandoning the country’s long-term debt anchor.
Since entering the IMF-supported Extended Credit Facility programme in 2023, Ghana has pursued an aggressive fiscal adjustment following its debt crisis, domestic debt restructuring and external default. The emphasis has been on restoring fiscal credibility, reducing borrowing requirements and rebuilding macroeconomic stability.
The Fund now argues that maintaining a 1.50% operational primary surplus over an extended period may be unnecessarily restrictive given Ghana’s substantial infrastructure, education, healthcare and social protection needs.
“Recent debt reduction gains and large development needs have raised concerns about the excessively tight medium-term fiscal stance under the current operational target,” the IMF said.
The recommendation is significant because the primary balance, government revenue minus non-interest expenditure, is one of the most important variables determining the direction of public debt.
The IMF’s position, however, is that Ghana can still meet the 45% debt-to-GDP target if the softer fiscal stance is accompanied by stronger structural reforms and disciplined public financial management.
Parliament amended the Public Financial Management Act in 2025 to introduce the debt anchor requiring public debt to decline to 45% of GDP by 2034, alongside an operational fiscal rule requiring a primary surplus of 1.50% of GDP on a commitment basis.
Reducing the operational target to 0.50% would represent an easing of 1.00 percentage point of GDP, potentially creating additional fiscal space for development expenditure.
The Fund’s argument is that the debt framework contains what it describes as “substantial in-built safeguards”.
One of those safeguards is a debt anchor calibrated below conventional Debt Sustainability Analysis thresholds, providing some room for the economy to absorb shocks without immediately breaching sustainability limits.
The framework also takes into account Ghana’s historical experience with volatile interest-growth differentials, fiscal slippages and sizeable stock-flow adjustments.
Those stock-flow adjustments are particularly important because Ghana’s public debt has historically been affected by factors that do not appear directly in the headline fiscal deficit, including exchange-rate movements, arrears, financial-sector interventions and obligations associated with state-owned enterprises.
That means simply meeting an annual primary balance target is not enough.
Debt sustainability also depends on controlling liabilities that emerge outside the conventional budget framework.
The IMF therefore places strong emphasis on public financial management reform.
Improved expenditure controls, better commitment management and stronger monitoring of fiscal risks could reduce unexpected debt accumulation and allow Ghana to operate with a smaller primary surplus without losing credibility.
Rather than depending primarily on spending cuts or higher headline tax rates, the Fund believes Ghana can strengthen revenues through better tax administration, improved compliance and the closure of collection gaps.
That matters because a lower surplus target will only provide useful fiscal space if the underlying revenue system becomes more efficient.
Otherwise, additional expenditure could simply translate into renewed borrowing.
The Fund also singled out state-owned enterprises as a major source of fiscal risk.
Financial weaknesses in the energy and cocoa sectors have periodically generated liabilities that ultimately migrate onto the government balance sheet.
Reducing those risks will therefore be critical if Ghana is to loosen the operational fiscal stance safely.
For investors, the IMF’s assessment may be interpreted as evidence that Ghana is moving from emergency adjustment towards a more mature phase of fiscal management.
The focus is gradually shifting from how much expenditure can be cut towards how public finances can be managed more efficiently while preserving debt sustainability.
A fiscal framework that is too restrictive for too long can suppress productive public investment and weaken the infrastructure base required for private-sector expansion.
Roads, energy systems, education, healthcare and social protection all require sustained public financing.
If debt dynamics have improved sufficiently, creating limited additional space for those priorities could support stronger medium-term growth.
But the IMF’s recommendation is not a case for abandoning fiscal discipline.
A lower primary surplus would only remain compatible with the 45.00% debt target if Ghana delivers credible improvements in tax administration, expenditure controls, SOE governance and broader structural reforms.
Failure to do so could slow debt reduction and increase vulnerability to higher global interest rates, weaker growth or renewed exchange-rate pressures.
During the crisis phase, the overriding objective was stabilisation. The next challenge is ensuring that the pursuit of stability does not itself become a constraint on development.
A permanent 1.50% surplus may produce faster debt reduction, but it also means less fiscal room for investment.
A 0.50% surplus provides more space, but demands much stronger institutions and better control of fiscal risks. The IMF’s latest assessment suggests Ghana may now be in a position to consider that trade-off.
The country may no longer need to choose between debt sustainability and development spending as starkly as it did during the height of the crisis.
If reforms continue and fiscal risks are contained, the IMF believes Ghana can pursue a somewhat less restrictive fiscal path while still reaching its 45.00% debt-to-GDP target by 2034.
