Answer :
Ghana has a significant danger of debt crisis and urgently needs IMF assistance. Application eligibility for global funds is based on a country's income level and disease load. Regardless of the prevalence of diseases, all low- and lower-middle income countries are eligible.
What are the impacts of debt burden on Ghana ?
The large level of debt Ghana is carrying may potentially induce capital flight by increasing the likelihood of currency devaluation, tax rises, and the desire to preserve the true worth of financial assets. In consequence, capital flight lowers domestic savings and investment, which lowers GDP, the tax base, and the ability to service debt. The Ghanaian private sector's ability to import goods, its competitiveness, and its ability to attract investment, all of which are constrained by the diversion of foreign currency to debt payments.
Due to the pervasiveness of government debt in the financial system, downgrades by foreign credit rating agencies increase sovereign risk, which has a negative impact on domestic banks' funding costs through a variety of channels. The domestic banking industry will be impacted by the country's public debt downgrade depending on how focused they are on domestic operations, how dependent they are on income from the government, and how much of their capital is exposed to government debt. Four key channels in which the local banking system may be impacted by the downgrading of sovereign debt are:
The balance sheets of banks are weakened by losses on holdings of government debt, which raises their risk and increases the cost and difficulty of obtaining credit. The value of the collateral that banks might use to secure wholesale funding and central bank liquidity is also diminished by increasing sovereign risk. When a sovereign is downgraded by a credit rating agency, domestic banks' ratings typically suffer as a result. increasing their expenses for wholesale financing and even limiting their access to the market. Banks have fewer funding benefits from implicit and explicit government guarantees when the sovereign is weaker.
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