Ghana Debt Sustainability 2025: Shift from High to Moderate Risk of Debt Distress in Latest DSA

Introduction

In a significant development for Ghana’s economy, the October 2025 Debt Sustainability Analysis (DSA) reveals that the country has transitioned from a high risk to a moderate risk of debt distress. This positive shift marks a key milestone in Ghana’s journey toward debt sustainability and restored creditworthiness. Finance Minister Dr. Cassiel Ato Forson highlighted this progress while presenting the 2026 Budget to Parliament, emphasizing the role of prudent fiscal policies.

This update is crucial for understanding Ghana’s fiscal consolidation efforts amid ongoing economic reforms. Investors, policymakers, and citizens alike are watching closely as Ghana implements strategies to stabilize its public finances post its 2022 debt default and IMF program. What does this mean for Ghana debt sustainability? Read on for a detailed breakdown.

Analysis

The DSA, a standard tool used by international financial institutions like the IMF and World Bank, assesses a country’s ability to service its debt without requiring restructuring or accumulating arrears. For Ghana, the October 2025 assessment confirms a downgrade in risk level from “high risk of debt distress” to “moderate risk,” reflecting improved macroeconomic indicators and fiscal discipline.

Understanding Debt Sustainability Analysis (DSA)

A DSA evaluates debt dynamics under baseline and stress scenarios, considering factors like GDP growth, export performance, fiscal balances, and external shocks. Ghana’s improvement stems from sustained fiscal consolidation, which began aggressively in early 2025. This program aims to rebuild fiscal buffers, restore macroeconomic stability, and anchor long-term debt sustainability.

Fiscal Performance Metrics

Key metrics include a narrowed fiscal deficit, strengthened primary balance, and controlled expenditures. Provisional data for the first three quarters of 2025 show outperformance against the revised full-year targets: a commitment-basis deficit of 2.8% of GDP paired with a 1.5% primary surplus, and a cash-basis overall deficit of 3.8% of GDP with a 0.5% primary surplus. These figures underscore Ghana’s fiscal prudence without sacrificing essential social programs or growth investments.

Summary

Ghana’s Debt Sustainability Analysis for October 2025 signals progress in managing public debt risks. Finance Minister Dr. Cassiel Ato Forson described the fiscal consolidation as one of the strongest in recent history during the 2026 Budget presentation. The government credits consistent policy implementation for narrowing deficits and stabilizing balances, positioning Ghana favorably for credit recovery.

This summary encapsulates how accountable fiscal governance is delivering results, with commitments to deepen revenue mobilization and adhere to the Medium-Term Debt Management Strategy.

Key Points

Practical Advice

For investors eyeing Ghana debt sustainability opportunities, monitor DSA updates and budget implementations closely. Diversify into Ghana Eurobonds or local currency instruments post-risk downgrade, but pair with IMF reviews.

For Policymakers and Citizens

Support revenue mobilization by engaging in tax compliance and advocating for efficient public spending. Businesses can contribute through formalization to boost domestic revenues, aiding fiscal consolidation Ghana-wide.

Investment Strategies

Consider short-term sovereign bonds yielding from fiscal improvements. Track primary surplus trends as indicators of sustained debt sustainability. Consult verified economic reports for personalized advice.

Points of Caution

While progress is evident, Ghana’s moderate risk of debt distress remains vulnerable to external shocks like commodity price volatility (cocoa, gold) or global interest rate hikes. Provisional Q1-Q3 2025 data are not final; full-year outcomes depend on Q4 performance.

Avoid over-optimism: Historical debt restructurings (e.g., 2023 domestic debt exchange) highlight risks. Ensure ongoing adherence to IMF Extended Credit Facility targets to prevent reversals in Ghana fiscal consolidation.

Comparison

Compared to 2022-2024, when Ghana faced high risk of debt distress post-domestic arrears and Eurobond default, the 2025 DSA marks a stark improvement. Pre-2025 DSAs consistently rated high risk; now moderate aligns with peers like Zambia post-restructuring.

Historical Fiscal Deficits

This table illustrates the narrowing trend, with 2025’s primary surpluses (1.5% commitment, 0.5% cash) a first in years.

Legal Implications

Ghana’s debt management operates under the Public Financial Management Act (2016) and Fiscal Responsibility Act, mandating deficit targets and debt strategy compliance. The shift to moderate risk supports ongoing IMF program adherence, potentially unlocking disbursements. No new legal challenges noted, but bondholder litigations from 2022 restructuring could resurface if targets slip. Debt sustainability gains bolster legal defenses in creditor negotiations.

Conclusion

Ghana’s progression to moderate risk of debt distress in the 2025 DSA exemplifies effective fiscal consolidation under Dr. Cassiel Ato Forson’s leadership. By prioritizing prudence, revenue growth, and strategic debt management, Ghana is on track for macroeconomic stability. Continued commitment will be vital to convert this reasonable chance into sustained prosperity. Stakeholders should stay informed on 2026 budget execution for long-term Ghana debt sustainability.

FAQ