IMF cautions the Ghanaian government against collateralised borrowing

The International Monetary Fund (IMF), has warned the Ghanaian government to avoid collateralized borrowing as a way of reducing the increasing public debt.


After the conclusion of its Article IV Consultation with Ghana, the Executive Board of the Fund said he was concerned about Ghana’s high risk of debt distress. He said there was a need to strengthen the fiscal rules and phase out off-budget operations.

Collateralized borrowing is when an institution pledges its assets or receivables to a lender which can be called upon in case of a default.

For example, government institutions such as GETFund and National Health Insurance Authority (NHIA) that receive funds from the GETFund and NHIL levies, could take a loan and use proceeds from the levies as collateral.

In their statement, the Executive Directors entreated the authorities to halt the new collateralized borrowing to reduce public debt and improve fiscal transparency.


The government’s US$2 billion sinohydro bauxite deal is seen as one of the new collateralized arrangements. In this deal, the government seeks to leverage its bauxite resources for the Chinese facility.

The IMF’s statement is coming at a time when the public debt stock as of September 2019, was at GH¢208.6 billion, equivalent to 60.3% (GDP), according to the most recent data released by the Bank Ghana.

In September last year, BoG reported the debt stock at GH¢170.8 billion, equivalent to 57.2% of GDP.

Debt dynamics

The IMF called on the government to take a more ambitious fiscal stance as it considers a comprehensive domestic revenue mobilization strategy.


Meanwhile, some of the directors suggested the adoption of a formal debt anchor to guide debt sustainability efforts over the medium term.


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