Ghana Officially Declares Bankruptcy; Government Debt Ratio Reaches 98.7% of GDP in 2023

Ghana's President, Nana Akufo-Addo, has officially declared his country bankrupt. This is marked by Nana's last resort: accepting a US$3 billion loan from the International Monetary Fund (IMF).

Data from the IMF on Friday, September 29, 2023, shows that Ghana's gross government debt-to-GDP ratio has reached 98.7%. The IMF reports that Ghana's GDP reached US$66.62 billion (Rp 1.030 trillion) as of April 2023.

According to CNBC Indonesia, capital market observer Yanuar Rizky states that the safe line for the international standard debt ratio is 60% of GDP.

The graph shows that the debt proportion in 2023 is the highest in the last decade. In 2011, the debt ratio was at its lowest, recorded at 31.3% of GDP.

The debt ratio increased significantly from 2019 to 2020, from 58.3% to 72.3% of GDP. After 2020, the debt proportion consistently increased.

In addition to the mountain of debt, Ghana also has high inflation. A report from Ghana's Ministry of Finance, cited by Kumparan.com on Tuesday, September 26, 2023, shows that inflation throughout 2023 has consistently been above 40%, peaking at 54% in January 2023.

Meanwhile, the benchmark interest rate jumped from 14% in December 2021 to 27% in December 2022.

The New York Times (NYT) reports that the Ghanaian government defaulted on billions of dollars in debt to foreign lenders in December 2022. This crisis was also caused by the Covid-19 pandemic, the impact of the Russian invasion of Ukraine, and higher food and fuel prices.

This led Nana to take the last resort of an IMF loan. This is the 17th loan the country has been forced to take since its independence in 1957.

However, the NYT views this complex cycle of crises and bailouts as having plagued dozens of poor and middle-income countries across Africa, Latin America, and Asia for the past several decades.

The NYT mentions that the IMF is developing a rescue plan for Ghana to help the country recover. This includes curbing debt and spending, increasing revenue, and protecting the poorest segments of society. This plan runs concurrently with Accra's negotiations with foreign creditors.