IMF warns Ghana of elevated financing needs due to large rollover of T-bills in 2027-28

The International Monetary Fund has cautioned Ghana about heightened financing requirements, with projections indicating a potential surge exceeding 16% of Gross Domestic Product in 2028. This warning stems from the concentration of Domestic Debt Exchange Programme-related maturities in the 2027-28 period, which has led to elevated domestic debt vulnerabilities.

The IMF's Country Report on Ghana highlights the heavy reliance on treasury bills and the substantial rollover needs expected in 2027-28, both of which exacerbate the risks associated with the country's financial landscape.

The report underscores the potential amplification of risks due to the domestic market's limited capacity to absorb additional debt issuance. To mitigate these rollover risks, the IMF suggests a carefully calibrated debt management strategy, advocating for a gradual increase in Treasury-bond issuance to lengthen maturities. This approach, supported by the IMF's technical advice, involves partial redemptions through sinking funds funded by earmarking 7.0% of non-oil tax revenue, coupled with bond issuances and buybacks, as well as rollovers via Treasury bills.

The IMF also emphasizes the need for careful monitoring of non-resident participation in the domestic treasury bond market to ensure alignment with Debt Sustainability Analysis (DSA) parameters. While there are no direct restrictions on non-resident participation, it could introduce risks if not managed properly. These risks include potential disruptions to debt sustainability and financial stability, stemming from capital flow volatility and exchange rate pressures.

The IMF stresses the importance of continuous monitoring of non-resident participation in both primary and secondary domestic debt markets, with a readiness to adjust external borrowing plans if inflows surpass prudent levels.

Furthermore, the IMF advocates for the strengthening of public debt reporting standards. It recommends expanding debt coverage to encompass quasi-fiscal activities and improving inter-agency coordination to enhance risk monitoring and inform more informed borrowing decisions. Strengthening public debt reporting standards by aligning compilation and dissemination with the General Framework for Statistical Methodology (GFSM) 2014 and broadening coverage to include quasi-fiscal activities is crucial for effective oversight and decision-making.