Ghana’s debt woes continue as the International Monetary Fund (IMF) has projected that the West African nation will end 2022 with a Debt-to-GDP of 90.7%.

According to the Bretton Woods Institution, the country’s Debt–to-GDP ratio will then reduce to 87.8% in 2023.

This was captured in its Fiscal Outlook Report released on the sidelines of the on-going IMF/World Bank Annual meetings in Washington DC, USA.

In October 2022, data from the Bank of Ghana showed that the country’s debt stock is currently standing at GH₵402 billion as of July 2022, representing 68% of GDP.

While this figure falls below the sustainability threshold of 70%, the World Bank in its Africa Pulse Report released in October 2022 projected that Ghana will end 2022 with a Debt –to –GDP ratio of 104%. This means the country’s debt will be highly unsustainable before the year comes to an end and could go above the projections made by the IMF.

The increase could be linked largely to the cedi depreciation and review of payment terms for some loans as well as new borrowings by government.

Debt Sustainability Analysis with the IMF

Ghana, a Low Income Developing Country per IMF’s classification, is currently undergoing Debt Sustainability Analysis with the IMF and the World Bank. This is expected to help the country ascertain the true levels of the debt stock.

The country was recently classified as a High Risk of Debt Distress by the World Bank and IMF in their Debt Sustainability Analysis.

The two Bretton Wood institutions are currently conducting a new Sustainability Debt Analysis on Ghana – a situation that could influence the outcome of an economic programme with Ghana by the end of 2022.

The Finance Minister, Ken Ofori-Atta, had already indicated that government is working hard to reach a programme with the IMF by November 2022.

Government is hoping to secure a programme with the IMF before the 2023 Budget presentation in parliament within the same period.

Meanwhile, the Fund also expects Ghana’s revenue expressed as a ratio of GDP to improve to 14.1% at the end of 2022 before subsequently increasing to 14.7% in 2023 and 15.4% in 2024.

President’s budget must be cut

On the back of current fiscal challenges, Former President, John Dramani Mahama, said the budget for the Presidency should be cut as the government seeks assistance from the International Monetary Fund (IMF).

Mr Mahama said the highest office of the land should “show the way” when speaking in an interview with VOA Africa on Wednesday, October 12.

“If the President himself is cutting the budget of government machinery, then everyone must be prepared to make a sacrifice.”
John Dramani Mahama

He also insisted that the country cannot continue seeking such support from the Breton Woods Institution. According to him, home-grown policies aimed at transforming the economy and equipping the youth must be implemented.

Mr Mahama added that IMF loans will not cure all economic ills because Ghana will still lack credibility on its own.

“You can implement a home-grown fiscal consolidated policy, but unfortunately, a lot of local and foreign investors will probably doubt that you can live by the promises that you make unless you have an institution like the IMF working with you.”
John Dramani Mahama

Officials of the IMF wrapped up the second visit to Ghana on October 7, 2022, following the conclusion of discussions on Fund support to the country.

Talks centered on economic growth and possible financial support for Ghana post-COVID. The IMF is now working towards assessing Ghana’s debt sustainability.