Ghana and the IMF: debt restructuring must go hand-in-hand with managing finances better

GHANA is struggling with managing its debt, 20-year high inflation, a weak currency, and rising inequality. For example, inflation rose to 33.9% in August 2022 from 9.7% a year earlier, while the cedi has depreciated by 41% year-to-date against the US dollar. These vulnerabilities have been worsened by the aftershocks of the ongoing Russia–Ukraine war and the COVID-19 pandemic.

These challenges have forced Ghana’s government to approach the International Monetary Fund (IMF) for an economic support package. Part of the engagement will involve a new assessment of the sustainability of the country’s debt.

Debt sustainability analysis classifies countries into four bands: low risk, moderate risk, high risk, and in debt distress. This is based on certain thresholds for key public debt indicators. Ghana’s last analysis, conducted in mid-2021, classified the country as being at high risk of external debt distress and overall debt distress. The assessment was carried out jointly by the IMF and the World Bank.

If the new assessment concludes Ghana’s