By Prince Offeh
Ghana’s Debt Crisis Exposed Gaps in IMF Assessments | Ghana’s 2022 debt crisis was preceded by several warning signs that were not fully reflected in assessments of the country’s ability to withstand a crisis, according to a policy paper by former First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari.
Published by the Finance for Development Lab (FDL), the paper questions whether the debt sustainability framework used for Ghana adequately captured the risks created by rising domestic debt and refinancing pressures.
Ghana had been classified as being at high risk of debt distress since 2015. However, successive IMF-World Bank Debt Sustainability Analyses continued to consider the country’s debt sustainable. The assessments relied partly on assumptions of continued market access, fiscal consolidation and economic growth.
Meanwhile, Ghana’s debt position continued to deteriorate. The present value of public debt-to-GDP rose from below 55 percent in the early 2010s to nearly 93 percent by 2022. External debt service also exceeded 40 percent of government revenue by that year.
Interest payments remained above 20 percent of government revenue, while international reserves stayed close to the minimum benchmark of three months of import cover.
Domestic debt increased the risks
Dr. Opoku-Afari argues that Ghana’s growing reliance on domestic borrowing created risks that the Low-Income Country Debt Sustainability Framework did not fully capture.
Banks, pension funds, insurance companies and foreign investors increasingly held government securities. As a result, risks shifted from external borrowing to domestic refinancing and financial-sector exposure.
The weighted average interest rate on public debt stood at 10.7 percent, while 17.5 percent of the debt stock was due within one year. Foreign-currency debt also accounted for an average of 54.5 percent of total public debt.
Consequently, higher interest costs increased borrowing needs. At the same time, cedi depreciation raised the local-currency value of external debt.
The paper identifies optimistic economic assumptions, inadequate attention to domestic debt risks and limited focus on structural fiscal weaknesses as key shortcomings.
These weaknesses include inefficiencies in the energy sector, state-owned enterprise governance and persistent problems with tax policy and administration.
Calls for stronger debt surveillance
Ghana’s repeated reliance on IMF programmes also highlights the challenge. The 2023 programme was the country’s 17th IMF-supported programme in about six decades.
Dr. Opoku-Afari therefore argues that stabilisation must go beyond short-term fiscal consolidation. Policymakers should address the structural factors that repeatedly drive debt accumulation.
The paper recommends stronger monitoring of refinancing risks, domestic borrowing costs, sovereign-bank linkages and contingent liabilities. It also calls for regular stress tests to assess the impact of higher interest rates, currency depreciation and a sudden loss of investor confidence.
Ghana’s Debt Crisis Exposed Gaps in IMF Assessments | AviationGhana
