IMF Warns Against Rushing Back to Global Debt Markets, Citing Ongoing

The International Monetary Fund (IMF) has cautioned Ghana against rushing back to global debt markets, urging the country to focus on rebuilding investor confidence and improving its credit rating before seeking to borrow again.

Ghana's debt position has improved significantly under the IMF-supported programme, with the latest Debt Sustainability Analysis moving the country from a high risk of debt distress to moderate risk.

Consolidating Gains, Strengthening Domestic Finances

IMF Resident Representative in Ghana, Dr. Adrian Alter, emphasized that the country's immediate priority should be to consolidate the gains from its debt restructuring and strengthen its domestic financing capacity. He noted that central government debt had declined to about 45% of GDP, a level the Fund had initially projected Ghana would only reach by 2034.

The progress made under the IMF-supported programme has created an opportunity for Ghana to gradually regain access to capital markets, but improved creditworthiness will be critical to keeping borrowing costs manageable, Dr. Alter said.

A Path to Investment-Grade Status

Dr. Alter highlighted the government's medium-term objective of achieving investment-grade status, which could significantly reduce the cost of borrowing, both domestically and internationally. He added that the reopening of Ghana's domestic bond market in March was an important first step, with the government subsequently issuing a seven-year local-currency bond.

Reducing interest costs is particularly important because debt servicing currently consumes about one-third of government expenditure. Lowering borrowing costs would give the government greater room to finance salaries, social programmes, and capital expenditure.

Managing Debt Issuance Strategy

Dr. Alter stressed that Ghana's substantial financing requirements, including debt refinancing and expenditure on development projects, would require a carefully managed debt issuance strategy. He noted that additional development spending could also be supported through stronger domestic revenue mobilization.

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. In this context, Dr. Alter's warnings serve as a reminder of the importance of prudent debt management in the country's recovery efforts.

Dr. Alter emphasized that Ghana needs to re-establish itself and improve its rating before seeking to borrow again. He pointed out that the country's improved creditworthiness would be critical to keeping borrowing costs manageable. With the government's medium-term objective of achieving investment-grade status, there is hope for a more sustainable debt profile in the future.

Source: JOY