Suppose the elaborate tables and graphs of the LIC DSF did not exist and all we had were Table 2 and market signals on Ghana’s perceived credit standing. The first telling observation would be the more than 20 percentage points of GDP increase in public debt with a rising share of $ debt in just two years. Second, we would see a big drop in the primary fiscal deficit-to-GDP ratio, pd, indicating a commendable fiscal effort but also raising the question of how sustainable it is, given political economy and the quality of fiscal institutions. Third, we would see that r is highly volatile and high. It jumps from 6% in 2013 to 19% in 2014 and one might guess that the high share of $ debt has something to do with this. Indeed, the public DSA table in IMF (2016) indicates that the real exchange rate depreciated by 26% in 2014. Fourth, real GDP growth, g, is on a downward trend, with (r-g) swinging from negative to highly positive.

A safe bet is that economists acquainted with debt crises in EMs would be alarmed by the results in Table 2. It depicts the public debt-to-GDP ratio, d, on an explosive path with d far above levels at which major crises occurred in EMs (for example, the Russian Federation 1998, Argentina 2001).

In keeping with the quote above from IMF and IDA (2004) that Ghana’s debt sustainability cannot be “de-linked from the sentiments of the market, as embodied in spreads on market interest rates,” let’s take a look at market signals prevalent at the time. The secondary market yields on Ghana's Eurobonds were above 15% in January 2016, signaling high default risk. Its credit rating had been lowered by Moody’s from B2 to B3 (equivalent to B-, six levels below investment grade) in March 2015, with a negative outlook.

The combination of Ghana’s debt fundamentals with market signals should have triggered urgency for a draconian fiscal consolidation on the argument that preventing a debt crisis is less costly than curing an economy after one. To be fair, IMF (2016) and the related LIC DSF took pains to note Ghana’s financing challenges given bond spreads and the global macroeconomic environment. But this was not reflected in any sense of urgency about remedying the situation, as evidenced by the two paragraphs devoted to public debt sustainability reproduced above. Instead, attention focused on debt burden indicators related to the PV of PPG external debt and PV of public debt.

Indeed, the public sector DSA in IMF (2016) relied on a continued rise in primary surpluses, and a return to r<g (implicit in the sign of “automatic debt dynamics”, ADD—see Annex 1 for the algebraic interpretation). The growth rate was projected to pick up considerably from the estimated 3% for 2015, something that should have been questioned given the then bleak outlook for commodity prices and slowing global growth.

# _International Liquidity_

The DSA in IMF (2016) noted the deteriorating terms under which Ghana was issuing new Eurobonds and its high public gross financing needs (fiscal deficit plus maturing debt), of the order of 25% of GDP, of which 60% was accounted for by domestic debt rollovers. A systematic analysis of international liquidity over the medium term would have helped. For example, as shown in Table 1 of this paper, the CAD was of the order of 10% of GDP. Table 4 on the balance of payments in IMF (2016) shows that gross international reserves were projected at around 13% of GDP for 2015, meaning that Ghana was on the edge of breaching the Guidotti-Greenspan rule. It would have been helpful to have computed measures like the ratio of the CAD plus short-term external debt to reserves, a measure that was used by Wall Street to identify the so-called “Fragile Five” emerging market economies in mid-2013 when Fed Chair Bernanke first mentioned the possibility of hiking US policy rates. In Ghana’s case, domestic debt 11