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Research Note: Responding to Ghana’s Debt Crisis to Avoid a Sri Lanka-Style Outcome

Updated: Feb 20, 2023

In response to the NPP’s reactionary economic crisis management, this memo assesses current debt management policies and offers recommendations for an alternative policy approach that addresses Ghana’s concurrent debt, currency, and inflationary crises. Despite materializing downside risks, the Ghanaian real economy has proven resilient in the face of inflation and currency crises. This strength gives the government a short window to head off a crisis before the effects of ill-conceived borrowing policies join with a decelerating global economy, creating a toxic mix of low growth, impaired fiscal space, and high debt.

To take advantage of this window, the government must first wind down counterproductive monetary and fiscal policy while engaging in more aggressive efforts to regain market confidence. The government's current policies of minor deficit reduction, partial debt restructuring, and high domestic borrowing reflect the half-measures proven ineffective in Sri Lanka earlier this year. Avoiding a similar outcome requires the ministry of finance should frontload a sizeable fiscal consolidation and comprehensive debt restructuring to create the fiscal space needed to stabilize the economy and taper off domestic borrowing.

Read the full research note here:

Reccomendations for Managing Ghana’s Debt Crisis - Policy Note
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