IMF predicts Ghana to reach moderate risk of debt distress by 2028

The International Monetary Fund (IMF) has issued a stern warning to Ghana, predicting that the country could face a moderate risk of debt distress by the year 2028. This revelation comes amid growing concerns over Ghana's burgeoning public debt, which stood at a staggering 434.6 billion CEDs as of December 2022. The IMF's staff report has underscored the urgent need for Ghana to implement stringent measures to mitigate the risk of an economic crisis. Joining CNBC Africa for insights into this unfolding situation is John Gatsi, Dean of the University of Cape Coast School of Business. Professor Gatsi acknowledges the IMF's projection, citing ongoing efforts to bolster revenue generation and foster inclusive growth as crucial steps towards debt sustainability. He remains cautiously optimistic that Ghana's economy could potentially accommodate its debt burden in the medium term, provided that targeted strategies are effectively implemented. In line with the IMF's recommendations, Ghana is urged to curtail public spending, enhance domestic revenue mobilization, and combat tax evasion. While some tax measures have already been introduced, further fiscal reforms are anticipated to align with the IMF's fiscal consolidation objectives. The IMF also advocates for a reevaluation of government expenditure priorities, favoring the elongation of flagship projects over excessive spending. President Nana Akufo-Addo has tempered expectations regarding the immediate impact of the three billion dollar IMF bailout, cautioning that macroeconomic challenges are likely to persist in the short to medium term. Despite the government's efforts to communicate the complexities of the IMF program, there appears to be a discrepancy in messaging, with differing narratives surrounding the program's anticipated outcomes. Looking ahead to the upcoming elections in Ghana, concerns arise regarding the historical trend of heightened government spending in pre-election periods. Professor Gatsi highlights the imperative for fiscal discipline during electoral cycles, emphasizing the need for both the government and the IMF to uphold fiscal prudence and curb reckless expenditure. Past instances of overborrowing leading to Ghana's current debt predicament underscore the critical importance of adherence to fiscal responsibilities during election years. Key priorities outlined in President Akufo-Addo's recent address include the revision of quasi-fiscal responsibilities attributed to the Ghana Cocoa Board, the completion of COVID-19 expenditure audits, and legislative adjustments pertaining to the central bank's lending practices to the government. Failure to address these pressing issues could jeopardize Ghana's economic stability and compromise its ability to meet international financial obligations. As Ghana navigates the challenges posed by its escalating debt burden and the demands of the IMF program, a concerted effort towards fiscal restraint, transparency, and accountability will be paramount in safeguarding the country's financial future. The coming months will prove pivotal in determining Ghana's ability to avert the looming specter of debt distress and set a course towards sustainable economic growth and stability.