IMF and World Bank Maintain Ghana’s Debt Distress Classification Despite Successful Debt Restructuring
The International Monetary Fund (IMF) and the World Bank have upheld Ghana’s classification as a country in debt distress, according to their latest Joint Debt Sustainability Analysis report.
This decision comes despite Ghana’s recent completion of a domestic debt exchange program, bilateral debt restructuring, and notable economic expansion.
Debt Distress Status
The Bretton Woods Institutions highlighted that Ghana’s ongoing debt distress status is due to the incomplete restructuring of its external commercial debt, which is a critical component of the IMF-supported program.
They emphasized the need for Ghana to address large financing gaps through a comprehensive debt restructuring operation with commercial creditors in alignment with the Debt Sustainability Analysis and the IMF program.
Key Findings on Ghana’s Debt Situation
The report indicated that, despite progress in domestic debt restructuring, the Present Value of Ghana’s total Public and Publicly Guaranteed (PPG) debt-to-GDP ratio breaches the 55% benchmark until 2034.
However, the institutions acknowledged some advancements in Ghana’s domestic debt strategy and significant strides in discussions with the Official Creditor Committee under the G20 Common Framework.
Government’s Perspective
The Ghanaian government contends that the latest debt distress classification does not fully account for the progress made with bilateral creditors and Eurobond debt holders.
It also noted that the IMF and World Bank typically rely on final economic data rather than provisional figures, which may not yet reflect the full extent of recent economic improvements.
The government remains optimistic that future analyses will present a more favorable outlook.
Debt Statistics as of December 2022
According to data from Ghana’s Ministry of Finance, the total external debt as of December 2022 stood at $20 billion, with bilateral external debt at $5.4 billion, Eurobond debt at $13.1 billion, and multilateral creditor debt at $10.4 billion. The government has reached a restructuring agreement with bilateral creditors.
Path to Improvement
The IMF and World Bank underscored the importance of successful program implementation for improving Ghana’s debt situation.
They cautioned that delays in implementing necessary reforms and securing external debt relief could exacerbate macro-financial instability.
To restore debt sustainability, the institutions recommend finalizing public debt restructuring and adhering to the IMF-supported reform agenda.
Forward-Looking Assessment
The IMF and World Bank’s report posits that with continued good-faith negotiations with private creditors and adherence to program parameters, Ghana’s debt could be deemed sustainable on a forward-looking basis.
The baseline scenario assumes strong program ownership and a commitment to the IMF-supported reforms, aiming to reduce the Present Value of Total debt-to-GDP and external debt service-to-revenue ratios to 55% and 18%, respectively, by 2028.
IMF Praise for Ghana’s Policy Implementation
The IMF commended the Ghanaian government for its steadfast implementation of sound macroeconomic policies. It emphasized that adherence to the program’s conditions would likely enable Ghana to achieve economic recovery before the program’s completion.
