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Public Finance

Monetary Policy

Research Note

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

Ken Stibler, Stephen Cofie 

November 30, 2022

Despite materializing downside risks, the Ghanaian real economy has proven resilient in the face of inflation and rapid currency depreciation. This strength gives the government a short window to head-off crisis before the effects of ill-conceived borrowing policies and slowing global growth become consistently low growth, impaired fiscal space, and a forced default. However, the current policies of minor deficit reduction, partial debt restructuring, and large- scale domestic borrowing reflect the half-measures proven ineffective in Sri Lanka earlier this year. To avoid a similar outcome, 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 risky domestic borrowing.

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K Stibler and S Cofie (2022), Responding to Ghana’s Debt Crisis to Avoid a Sri Lanka-Style Outcome, Center for Emerging Economies, Washington DC.

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