IMF cautions Ghana against rushing back to international capital markets

The International Monetary Fund (IMF) has cautioned Ghana against hastily returning to the international capital markets to borrow, emphasizing the need to first rebuild investor confidence and enhance its credit rating. Dr Adrian Alter, the IMF Resident Representative in Ghana, advised the country to concentrate on consolidating its debt restructuring progress and bolstering domestic financing, rather than rushing into fresh external commercial borrowing.

Ghana's debt situation has notably improved under the IMF-supported program, with the Debt Sustainability Analysis downgrading the nation from a high risk of debt distress to a moderate risk. Central government debt has also declined to around 45% of GDP, a target the IMF initially projected Ghana would only achieve by 2034. This progress presents an opportunity for Ghana to gradually regain access to international capital markets, provided the country's creditworthiness is restored and borrowing costs are lowered.

Dr Alter highlighted the government's medium-term objective of achieving investment-grade status as a significant step to substantially reduce borrowing costs both domestically and internationally. The reopening of Ghana's domestic bond market in March was also deemed an important milestone in restoring investor confidence. Although Ghana still faces substantial financing requirements, including debt refinancing and funding for development projects, Dr Alter stressed the importance of a carefully managed approach to new borrowing.

The IMF representative stressed that reducing interest payments should be a primary priority, as debt servicing currently consumes about one-third of government expenditure. Lowering borrowing costs would create additional fiscal space for the government to finance salaries, social interventions, and capital projects. Moreover, strengthening domestic revenue mobilization could provide further resources for development spending.

The IMF's broader goal is to assist Ghana in addressing its economic imbalances and restoring its ability to sustainably finance its needs through both domestic and international sources.