Tracking Ghana's Path to Debt Sustainability

Ghana’s debt has surged to unsustainable levels, reaching about 86.1% of GDP at the end of 2023, down from 93.3% in 2022. According to the IMF’s Debt Sustainability Analysis conducted before Ghana’s 17th programme with the Fund, the nation was in debt distress with a medium debt-carrying capacity. Despite external challenges like the COVID-19 pandemic and the Russia-Ukraine War affecting many nations, Ghana’s significant debt burden is primarily attributed to governance and institutional inefficiencies, with the energy sector being a key contributor. Before the IMF programme, servicing of energy sector debt was consistently extra-budgetary, although it constituted contingent liabilities in a real sense.

Public resources were recurrently sacrificed outside the budget to sustain the inefficiencies in the energy sector at the expense of social spending, undermining optimum development outcomes for the populace (rising poverty and deepening inequality). Reforming the energy sector is a critical component of the IMF programme.

The government is expected to resume commercial borrowing following the completion of debt restructuring with external creditors, as the country achieves fiscal and macroeconomic stability. Without addressing the significant debt accumulation in the energy sector, there is a risk of falling back into debt distress. This debt tracker aims to monitor the relationship between the debt sustainability of the country and the accumulation of under-recoveries in the energy sector.

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