Ghana has been cautioned against making a premature return to international capital markets, as such a move could undermine its ongoing economic recovery.
The warning was issued by Robert Taliercio, the World Bank Country Director for Ghana, Liberia, and Sierra Leone, during the launch of the World Bank’s latest Public Finance Review report, titled “Building the Foundations for a Resilient and Equitable Fiscal Policy.”
According to Taliercio, while Ghana has made significant progress in restructuring its debts and securing relief under the $3 billion International Monetary Fund (IMF) Extended Credit Facility (ECF), an early re-entry into global financial markets could have adverse consequences. He emphasized that such a move might send negative signals to investors, potentially reversing the country’s economic gains and leading to unsustainable borrowing costs.
Ghana recently concluded a major debt restructuring exercise, which included both domestic and external debt, providing the country with much-needed fiscal space. However, Taliercio cautioned that despite these achievements, the country must remain vigilant and avoid past mistakes that have led to financial instability.
“The risk now is falling into complacency with these achievements and returning to a business-as-usual mindset – a recurring error in the past. Ghana has requested a record 17 IMF programs and has been under active IMF supervision for 40 out of its 68 years of independence.”
IMF
His remarks highlight Ghana’s repeated cycles of economic distress, often caused by excessive borrowing, fiscal mismanagement, and a reliance on short-term financial fixes. Taliercio’s statement serves as a strong reminder that while the country has made important progress, long-term financial discipline is required to maintain stability.
Risks of Rushing Back to International Markets
Since 2022, Ghana has been unable to access international capital markets due to its high debt levels, slow economic growth, and fragile balance of payments. While the country is keen to regain investor confidence and attract foreign financing, the World Bank has advised caution in the timing and strategy of its return.
Taliercio warned that rushing back to these markets for dollar-denominated funding could prove counterproductive, as it may increase the cost of borrowing and reintroduce financial instability. This is particularly concerning given the unpredictable nature of global financial conditions and the risk that Ghana might face unfavorable borrowing terms.
Instead, the World Bank advises that Ghana focus on strengthening its domestic revenue base, improving fiscal discipline, and implementing structural reforms that will make the economy more resilient. By doing so, the country can avoid the pitfalls of over-reliance on external debt and ensure that any future borrowing is sustainable.
Ghana’s economic challenges in recent years have underscored the importance of prudent fiscal management. The government has undertaken major reforms as part of the IMF-backed program, including expenditure controls and revenue-enhancing measures. However, the risk of reversing these gains remains high if the country does not maintain a disciplined approach to its finances.
The World Bank’s latest report emphasizes the need for long-term fiscal reforms that promote economic equity and resilience. This includes diversifying the economy, strengthening domestic financial institutions, and ensuring that government spending aligns with sustainable revenue generation.
While Ghana’s eagerness to re-enter international capital markets is understandable, experts argue that the country must first consolidate its economic recovery before taking such a step. Careful planning and responsible financial management will be key to ensuring that any future borrowing does not lead to another cycle of debt distress.
Ghana’s recent debt restructuring and IMF program have provided the country with an opportunity to reset its economic trajectory. However, the World Bank has warned that prematurely returning to international capital markets could jeopardize these hard-won gains.
Taliercio’s cautionary message serves as a crucial reminder that fiscal discipline, structural reforms, and careful planning are essential for sustaining economic stability. By avoiding past mistakes and prioritizing long-term economic resilience, Ghana can build a stronger and more sustainable financial future.
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