The International Monetary Fund (IMF) has urged Ghana to access the G20’s Debt Service Suspension Initiative (DSSI) on the back of less fiscal space and continued rising debts.
According to the Bretton Wood institution, support from the DSSI through debt relief will be essential to the country and ensure that Ghana is not overwhelmed by costs of servicing its debts.
Adding that, debt restructuring may be unavoidable for Ghana.
“Developing countries have far less policy space, and many entered this crisis [Covid-19] with high debt that is set to rise even further during the pandemic. Support from the international community through grants, concessional loans, and debt relief will be essential to ensure that these countries are not overwhelmed by crisis costs and rising poverty.”
“Debt restructuring may be unavoidable for some countries. While temporary liquidity relief can help mitigate the lack of policy space, for some countries it may not be enough in situations where sovereign debt is unsustainable. In such instances eligible countries should work with creditors to restructure their debt under the new Common Framework agreed by the G20,” said the IMF in its latest January 2021 World Economic Outlook Report.
Ghana’s total debt stock is projected to reach 80 per cent of Gross Domestic Product (GDP) by the end of 2021, placing it in the high-debt distress category and threatening the stability of the economy.
According to Moody’s in its January 2021 Sub-Saharan Africa Outlook Report, Ghana’s economy will come under pressure with rising debts as the country will be ranked second in Sub-Sahara with the greatest vulnerability to external debt-stress pressure.
Moody’s attributes Ghana’s growing debts to the rise in the country’s borrowing requirements as compared to its peers on the Continent.
With domestic revenue mobilization expected to remain low, repayment of bilateral and multilateral loans will be difficult for the country.
As the nation’s borrowing requirements rise amid wider financing gap and upcoming maturities, debt market analysts have urged Ghana to take advantage of the G20 Debt Service Suspension Initiative (DSSI) to get some modest liquidity relief as re-echoed by the IMF.
With the DSSI, bilateral loans with maturities that fall due within the programme will have a repayment period of 5 years.
Presently, Ghana’s debt stock stands at Ghs 283 billion, representing 71 per cent of GDP.