What the World Bank’s report says about Ghana’s debt sustainability

• The debt sustainability analysis is done by the World Bank and the IMF, to establish the ability of a member country to pay back its debts

• The country’s current debt stock has reached 305 billion Ghana cedis

• Ghana’s economy and revenue is picking up strongly and could improve the situation in the coming days.


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The World Bank has finalized works on Ghana’s debt sustainability analysis report. This assessment is to establish whether the country has reached the stage where it may struggle to repay its debts on time.

The debt sustainability analysis is also done by the World Bank and the IMF to establish the ability of a member country to pay back its debts on time.

The exercise looks at a country’s ability to meet its debt obligations when they are hit by some challenges which affects its revenue. It assesses each country based on some seven indicators and key among them is a country’s ability to raise revenue to service its debts.

The debt sustainability analysis has become important, following Ghana’s transmission from a developing country to a low-middle income one.

Ghana’s debt stock has reached 300 and 5 billion Ghana cedis, according to statistics provided by the Finance Ministry. Fears are that, with our situation getting worse, Ghana could soon drop into that category after the review is completed.

Outcome of World Bank’s debt sustainability analysis report on Ghana

According to the debt sustainability analysis report, Ghana’s public debt exceeds its threshold by 11 percentage points on average for the first five years of the forecast under the baseline scenario, declining below the threshold after 2026. Fiscal slippages and realization of contingent liabilities in finance and energy will push the current public debt-to-GDP ratio beyond the benchmark which the country had in 2020, despite the recent GDP rebasing.

The most severe scenario, according to the report, is the commodity price shocks, resulting in persistently high levels. Deviations resulting from this could reach 88 percent in 2025 and not decline below 84 percent for the remainder of the forecast. The commodity price shock is also the most severe test for the debt service-to-revenue ratio.

Under such shock, the debt service would absorb 103 percent of revenues in 2026, according to the report.

Resultantly, Ghana has a medium debt carrying capacity, unchanged from the last debt sustainability analysis vintage.
The composite index used to determine this debt carrying capacity is comprised of the World Bank’s CPIA score and macro-economic fundamentals from April 2019.

In effect, this means the current account deficit is expected to remain at 3.1 percent of GDP achieved in 2019. This percentage was projected to further widen to 3.6 percent of GDP in 2020, reflecting decline in oil output and interest costs.

The current account deficit will improve, particularly once new hydrocarbon facilities come online in 2023, to an average of 2.4 percent of GDP thereafter. The non-interest current account will improve as well, reflecting maintenance of surpluses in the trade account. Gross foreign exchange reserves will also improve steadily from 2022.

Government on debt stock:

Meanwhile, government has argued that, despite the spike in the debt stock which was related to COVID-19 expenditure and the banking sector clean up, it believes that it has done enough to ensure that Ghana doesn’t get to that bracket of a debt distress country.

Also, with the expansion of the economy and revenue picking up strongly, it expects the situation to improve in the coming months.

Getting to that bracket of a debt distress country might not be good for Ghana’s cost of borrowing and even private businesses in Ghana.