Ghana is targeting $10.5-billion of external debt service relief from 2023-2026, the International Monetary Fund (IMF) said, giving first indications of how big a hit investors might face in the coming debt overhaul.

The embattled West African country's debt is currently unsustainable, but Ghana aims to restore it to a "moderate" risk of debt distress by 2028, the fund added in its Debt Sustainability Analysis. 

The IMF's executive board approved a $3-billion, three-year rescue loan on Wednesday, paving a potential path for Ghana out of the worst economic crisis in a generation.

Ghana is overhauling its debt after its already strained finances buckled under the economic fallout from Covid-19 and Russia's invasion of Ukraine. It is seeking external debt relief under the Group of 20's Common Framework platform and completed a domestic debt exchange earlier this year.

Ghana has a $15-billion financing gap in its balance of payments from 2023 to 2026, the IMF said, with the World Bank set to provide $1.6-billion in budget and balance-of-payments support.

The country has a medium "debt carrying capacity", which means the IMF requires Ghana to target bringing its public debt-to-GDP ratio from 88.1% at the end of 2022 to 55% by 2028.

The cedi currency strengthened 2.4% against the U.S. dollar to 10.30 on the news, taking its rise so far this month to 12.24% as international investors anticipated IMF board approval.

Most of Ghana's sovereign dollar-denominated bonds strengthened modestly on Thursday, with some rising as much as 0.3 cents in the dollar although still trading at deeply distressed levels of between 36 and 41 cents in the dollar.

"Domestic policy slippages represent a significant downside risk to the projections, further compounded by risks associated to the end-2024 general elections," the IMF report said.

Other risks for Ghana include social unrest if economic conditions do not improve for the population, not regaining market access to issue debt and the domestic debt exchange posing dangers to domestic financial sector stability, the fund said.