Harare — Ghana faces a possible debt default as it's debt crisis sees no end it sight, according to Nile Post.
On October 30, 2022, President Nana Akufo-Addo took the nation into his confidence. "We are in a crisis, I do not exaggerate when I say so. I cannot find an example in history when so many malevolent forces have come together at the same time. But, as we have shown in other circumstances, we shall turn this crisis into an opportunity to resolve not just the short-term, urgent problems, but the long-term structural problems that have bedeviled our economy," he said.
The country's financial crisis was exacerbated by the global impact of Covid-19 and the war between Russia and the Ukraine. The government was forced to seek assistance from the International Monetary Fund to prevent it from defaulting on debt repayments. The IMF provided a U.S.$3 billion loan to help the country's economy but it was subject to the Ghanaian government getting its public debt down to more manageable levels and also needed the buy-in from bond holders.
At the time, Finance Minister Ken Ofori-Atta said "the clinching of the U.S.$3 billion Extended Credit Facility with the International Monetary Fund will help bring Ghana back on the path of growth, macroeconomic stability and debt sustainability". Ghana received a U.S.$600 million tranche as part of the U.S.$3 billion IMF loan.
In May, Akufo-Addo said the U.S.$3 billion would not immediately resolve Ghana's economic issues. However, the loan reduced currency fluctuations and increased trust, which helped stabilise the economy. Inflation has since reduced from its peak of 54% in January, even if it is currently at about 40%.
Ghana, a major producer of cocoa and gold, also has oil and gas deposits. However, in 2022, its debt rose, and like the rest of sub-Saharan Africa, it was impacted by the effects of the Covid-19 pandemic and the war between Russia and the Ukraine.
The national debt to gross domestic product (GDP) ratio for Ghana is 98.7% for the year 2023. This percentage is higher than both the figure of 79.6% that was recorded in 2021 and 88.7% that was observed in 2022.
The government reportedly owes independent power producers U.S.$1.58 billion as the country faces the possibility of widespread blackouts, the Nile post reports.
"Large external shocks in recent years have exacerbated Ghana's pre-existing fiscal and debt vulnerabilities, resulting in a loss of international market access, increasingly constrained domestic financing, and reliance on monetary financing of the government. Decreasing international reserves, Cedi depreciation, rising inflation and plummeting domestic investor confidence, eventually triggered an acute crisis," the IMF said.
In order to deal with Ghana's debt, the IMF put forward a comprehensive rescue plan that includes cutting spending, raising revenue, and safeguarding the most vulnerable people while negotiating with foreign creditors.
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The matter was a vital discussion point at the 78th UN General Assembly in New York, which was attended by several African nations. The debt burden of developing nations was also a point of discussion - a situation which is projected to reach above U.S.$200 billion.
The Ghanaian government also officially launched the domestic exchange programme in December 2022 with a request for public participation as part of steps to restructure and reduce the country's debt portfolio, to levels that are manageable.
According to The Nile Post, Ghana's government owes U.S.$63.3 billion by the end of 2022 to both domestic and foreign creditors, including pension funds, insurance firms, and local banks.
Now, future financial stability is in doubt because of the lingering debt problem, geopolitical developments, and rising food and fuel prices.
