IMF cautions Ghana against early return to international capital markets
Ghana should focus on rebuilding investor confidence and improving its credit rating before seeking to borrow again on the international capital markets, the International Monetary Fund (IMF) has cautioned.
The International Monetary Fund (IMF) has warned Ghana against rushing back to international capital markets too soon, urging the country to first focus on rebuilding investor confidence and improving its credit rating. Dr Adrian Alter, the IMF Resident Representative in Ghana, emphasized that consolidating the gains from the debt restructuring and strengthening domestic financing capacity should be the immediate priorities rather than seeking external commercial borrowing.
The IMF's latest Debt Sustainability Analysis has moved Ghana's debt position from a high risk of distress to a moderate risk, with the country's central government debt now at approximately 45% of GDP - a level the Fund had projected Ghana would only reach by 2034. While this progress creates an opportunity for Ghana to gradually regain access to capital markets, Dr Alter stressed that improved creditworthiness would be crucial to keeping borrowing costs manageable.
He highlighted that achieving an investment-grade status could significantly reduce borrowing costs for both domestic and international lenders. The reopening of Ghana's domestic bond market in March and the issuance of a seven-year local-currency bond mark important first steps in this process. However, Ghana faces substantial financing needs, including debt refinancing and expenditure on development projects, which require a carefully managed debt issuance strategy.
Dr Alter stressed that lowering interest costs is particularly important, as debt servicing currently accounts for about one-third of government expenditure. Reducing borrowing costs would give the government greater room to finance salaries, social programs, and capital expenditure. Additionally, strengthening domestic revenue mobilisation could support additional development spending, while the IMF's broader objective remains to help Ghana eliminate economic imbalances and restore its ability to finance its needs from sustainable domestic and international sources.
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