The International Monetary Fund (IMF) has stated that a sustained improvement in the debt trajectory warrants upgrading Ghana’s Debt Sustainability Analysis (DSA) rating from high to moderate risk of debt distress.

At the fifth review under the Economic Credit Facility (ECF), the IMF Staff applied judgement to retain a high-risk rating despite all debt indicators falling below their respective thresholds. This was due to uncertainty around the exchange rate and gold prices.

With continuing macroeconomic and exchange rate stability, and a clearer fiscal outlook, the IMF said in its Country Report on Ghana that the Staff now proposes to remove this judgement and upgrade Ghana to moderate risk of debt distress, consistent with the mechanical signal.

Despite this improvement, it pointed out that the space under the external debt-service-to-revenue ratio remains limited.

Debt Vulnerabilities Remains

Despite progress, the IMF said the debt vulnerabilities remain elevated and require continued vigilance. “The DSA highlights that debt dynamics remain sensitive to external shocks given Ghana’s reliance on gold and other commodity exports”.

It added that stress tests show that adverse export and commodity price shocks could push both solvency and liquidity indicators above their thresholds for a prolonged period. “The exchange rate remains a key transmission channel, given the substantial share of FX-denominated external debt and non-resident holdings of domestic debt. Contingent liabilities represent another key source of downside risk: fiscal risks from the energy sector, financial sector recapitalization needs, and quasi-fiscal activities remain particularly salient”.

According to the Fund, these risks underscore the importance of fiscal and sectoral reforms, adequate external buffers, exchange rate flexibility, and efforts to diversify exports.

“Completing restructuring negotiations with residual external commercial creditors and signing the remaining bilateral agreements also remain a priority”, it added.