IMF upgrades Ghana to moderate risk of debt distress

The International Monetary Fund (IMF) has upgraded Ghana's debt risk rating, moving from high to moderate risk of debt distress. This decision, made during the fifth review of Ghana's Debt Sustainability Analysis (DSA) under the Economic Credit Facility (ECF), was based on a sustained improvement in Ghana's debt trajectory. Despite all debt indicators being below their respective thresholds, uncertainty around the exchange rate and gold prices led the IMF to retain the high-risk rating.

However, with ongoing macroeconomic stability and a clearer fiscal outlook, the IMF now proposes to upgrade Ghana's debt risk rating to moderate, as indicated in its Country Report on Ghana.

Although this improvement is noted, the IMF emphasizes that Ghana's debt vulnerabilities remain elevated and require continued monitoring. The DSA highlights that debt dynamics are still sensitive to external shocks, particularly due to Ghana's reliance on gold and other commodity exports. Stress tests indicate that adverse export and commodity price shocks could push solvency and liquidity indicators above their thresholds for an extended period.

The exchange rate, given the substantial share of FX-denominated external debt and non-resident holdings of domestic debt, remains a crucial transmission channel.

Contingent liabilities, including fiscal risks from the energy sector, financial sector recapitalization needs, and quasi-fiscal activities, also pose significant downside risks. The IMF stresses the importance of fiscal and sectoral reforms, maintaining adequate external buffers, ensuring exchange rate flexibility, and diversifying exports to mitigate these risks.

Additionally, completing restructuring negotiations with residual external commercial creditors and signing the remaining bilateral agreements are identified as priorities for Ghana.