Ghana’s debt distress risk rating has been proposed for an upgrade by the International Monetary Fund (IMF), moving the country from a high to a moderate risk of debt distress.

According to the Bretton Woods institution, Ghana’s debt indicators have improved, alongside relative economic stability compared to previously, when there were concerns about the country’s ability to meet its debt obligations.

Earlier, at the fifth review under the Economic Credit Facility (ECF), the IMF identified improvements in Ghana’s debt indicators that could have warranted an upgrade. However, uncertainty surrounding gold prices and exchange rate stability deterred the Fund from changing the country’s risk rating at the time.

With continuing macroeconomic and exchange rate stability, as well as a clearer fiscal outlook, the IMF said in its Country Report on Ghana that its staff now proposes to remove this judgement and upgrade Ghana to a moderate risk of debt distress, consistent with the mechanical signal.

Despite this improvement, the IMF pointed out that the space under the external debt-service-to-revenue ratio remains limited.

Debt vulnerabilities remain

Despite the progress, the IMF said debt vulnerabilities remain elevated and require continued vigilance.

“The DSA highlights that debt dynamics remain sensitive to external shocks given Ghana’s reliance on gold and other commodity exports.”

It added that stress tests show that adverse export and commodity price shocks could push both solvency and liquidity indicators above their thresholds for a prolonged period.

“The exchange rate remains a key transmission channel, given the substantial share of FX-denominated external debt and non-resident holdings of domestic debt. Contingent liabilities represent another key source of downside risk: fiscal risks from the energy sector, financial sector recapitalization needs, and quasi-fiscal activities remain particularly salient.”

According to the Fund, these risks underscore the importance of fiscal and sectoral reforms, adequate external buffers, exchange rate flexibility, and efforts to diversify exports.

“Completing restructuring negotiations with residual external commercial creditors and signing the remaining bilateral agreements also remain a priority,” it added.