IMF warns Ghana of looming debt cliff as financing needs surge above 16% of GDP in 2028

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The International Monetary Fund (IMF) has issued a stark warning to Ghana regarding a significant concentration of domestic debt maturities in 2027 and 2028, which it says could push the country’s gross financing needs above 16% of Gross Domestic Product (GDP) and expose the economy to seve refinancing pressures.

In its latest Country Report on Ghana, the Fund highlighted that domestic debt vulnerabilities remain “elevated” due to the heavy reliance on short-term treasury bills and the substantial rollover requirements stemming from the Domestic Debt Exchange Programme (DDEP) implemented during the height of Ghana’s debt crisis.

The IMF’s assessment underscores the precariou balancing act facing the government as it seeks to restore fiscal sustainability while managing a looming debt wall that threatens to undo the hard-won gains made under the current $3 billion Extended Credit Facility (ECF) programme.

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The DDEP Legacy: A Ticking Fiscal Time Bomb

Ghana’s domestic debt restructuring, which concluded in early 2023, was a cornerstone of the government’s strategy to regain access to international capital markets and secure the IMF bailout. The DDEP involved the exchange of approximately GHS 137 billion (around $11 billion) in domestic bonds for new instruments with lower coupon rates and extended maturities.

While the programme successfully reduced the immediate debt service burden and eased pressure on the cedi, it created a structural problem: the new bonds were largely issued with maturities concentrated around the 2027–2028 window. As those instruments now approach their redemption dates, the government faces the formidable challenge of refinancing a massive chunk of its domestic debt in a relatively short period.

The IMF report confirms that this concentration will push gross financing needs—the total amount of funds the government requires to cover its budget deficit and repay maturing debt—to peak above 16% of GDP in 2028. This level is widely considered perilous for an emerging economy, particularly one still grappling with high inflation and exchange rate volatility.

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Heavy Reliance on Short-Term Instruments Amplifies Risks

The Fund warned that Ghana’s heavy dependence on short-term domestic instruments, particularly treasury bills, exacerbates these vulnerabilities. Banks and financial institutions, which hold a large portion of government securities, are heavily exposed to the sovereign, leaving the domestic market’s capacity to absorb additional government issuance severely limited.

“If the government is forced to roll over these maturities by issuing new bills and bonds, it could crowd out private sector lending, drive up interest rates, and put further pressure on the cedi,” economic analysts noted. The IMF cautioned that an abrupt rollover failure could trigger a liquidity crisis, undermining investor confidence and potentially reversing the fragile stability achieved since the 2022 default.

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IMF-Backed Mitigation Strategy: A Multi-Pronged Approach

To navigate this impending debt cliff, the IMF says it has provided technical assistance (TA) to help Ghana craft a carefully calibrated debt management strategy. The adopted plan aims to lengthen average maturities and dilute the concentration risk through a combination of four key measures:

1. Partial Redemptions via Sinking Fund – The government will set aside funds specifically for debt repayment, financed by earmarking 7.0% of non-oil tax revenue. This sinking fund acts as a dedicated savings vehicle to retire portions of the maturing debt without recourse to fresh borrowing.
2. Debt Buybacks – The authorities may engage in market buybacks, purchasing their own outstanding bonds at a discount from the secondary market, thereby reducing the total stock of debt that requires cash repayment at maturity.
3. Gradual Scaling Up of Treasury-Bond Issuance – Instead of relying on short-term T-bills, the government will progressively increase the issuance of longer-dated treasury bonds to smooth out the maturity profile and reduce rollover frequency.
4. Strategic Rollovers – A portion of the maturing obligations will be rolled over into new instruments, but the IMF warns that this must be done with extreme caution to avoid locking the country into a cycle of perpetual refinancing.

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Foreign Investor Participation: A Double-Edged Sword

The IMF also drew attention to the role of non-resident investors in Ghana’s domestic bond market, noting that while their participation can deepen the market and provide alternative financing sources, it also introduces significant risks.

“Non-resident participation is not directly restricted,” the report stated, “but it introduces risks given secondary-market flows’ potential impact on debt sustainability and financial stability through potential capital flow volatility and exchange rate pressures.”

The Fund urged the government to monitor non-resident activity in both primary and secondary debt markets closely. It recommended that authorities remain ready to adjust external borrowing plans if inflows exceed prudent levels, in order to prevent overheating or sudden reversals that could destabilise the local currency.

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Calls for Stronger Transparency and Debt Reporting

In addition to managing the immediate 2027-28 maturities, the IMF called on Ghana to strengthen its public debt reporting standards as a crucial safeguard against future fiscal surprises. The Fund recommended aligning compilation and dissemination practices with the Government Finance Statistics Manual (GFSM) 2014, a widely recognised international standard.

Furthermore, the report urged broader debt coverage to capture quasi-fiscal activities—such as off-balance-sheet liabilities from state-owned enterprises and public-private partnerships—which often remain hidden from official debt tallies but can pose significant contingent risks.

“Improving inter-agency coordination will strengthen risk monitoring and support more informed borrowing decisions,” the IMF added, suggesting that the Ministry of Finance, the Bank of Ghana, and the Debt Management Office must work in closer harmony to provide a unified and accurate picture of the nation’s fiscal health.

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Context: Ghana’s Long Road to Debt Recovery

The IMF’s warning comes as Ghana seeks to complete its external debt restructuring negotiations with official creditors and Eurobond holders. The country defaulted on most of its external debt in December 2022, citing unsustainable debt levels that had spiralled to over 90% of GDP.

The $3 billion ECF programme, approved in May 2023, has provided critical balance-of-payments support, but strict performance criteria have forced the government to implement tough reforms, including tax increases, expenditure cuts, and subsidies removal. While Ghana has successfully completed several reviews under the programme, the looming domestic maturity wall represents the next major test of its commitment to fiscal discipline.

The report underscores that while the DDEP provided short-term relief, the long-term solution lies in sustainable debt management, diversified revenue streams, and reduced reliance on short-term borrowing. The authorities have already signalled their commitment to the IMF’s strategy, with the 7.0% non-oil tax revenue earmarking for the sinking fund already reflected in the 2026 budget projections.

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What This Means for the Ghanaian Economy

For ordinary Ghanaians, the IMF’s warning has broader implications. If the government fails to manage the 2027-28 refinancing smoothly, the consequences could include higher inflation, currency devaluation, and renewed pressure on public services as the government is forced to prioritise debt servicing over social spending.

Conversely, successful execution of the mitigation strategy could reinforce investor confidence, lower borrowing costs, and pave the way for a sustainable recovery. The coming year will be critical