By 
Ghana’s government teeters on the edge of bankruptcy, resulting in its 17th financial rescue from the International Monetary Fund (IMF) since gaining independence in 1957.
Emmanuel Cherry, the CEO of a Ghanaian association of construction firms, sat in a café near Accra Children’s Park, tallying the outstanding debts owed by government entities to thousands of contractors. Before interest, he estimated these arrears at 15 billion cedis, roughly $1.3 billion. As a consequence, many contractors have laid off their workers.
Ghana’s contractors, like numerous others in the country, find themselves waiting in line to receive their payments. Teacher trainees complain of two months of unpaid salaries, and independent power producers warn of imminent major blackouts, with debts totaling $1.58 billion.
The government is essentially insolvent. After defaulting on billions of dollars owed to foreign lenders in December, President Nana Akufo-Addo’s administration had no option but to secure a $3 billion loan from the IMF, the lender of last resort.
This marks the 17th time Ghana has turned to the IMF for assistance since gaining independence in 1957.
While the latest crisis has been exacerbated by the impact of the COVID-19 pandemic, Russia’s invasion of Ukraine, and rising food and fuel prices, the recurring pattern of crisis and bailout has afflicted numerous low- and middle-income countries across Africa, Latin America, and Asia for decades.
These relentless cycles will be a topic of discussion at the United Nations General Assembly, where the debt burden for developing nations, now exceeding $200 billion, threatens to disrupt economies and undermine hard-earned progress in education, healthcare, and income. However, poor and low-income nations have struggled to garner sustained international attention.
In Ghana, the IMF has presented a comprehensive rescue plan to address the country’s challenges, including debt and spending control, revenue enhancement, and support for the most vulnerable populations, while negotiations with foreign creditors are ongoing.
However, a lingering question remains for Ghana and other emerging nations grappling with debt: What will make this time different?
The most recent rescue plan for Ghana tackles critical issues, according to Tsidi M. Tsikata, a senior fellow at the African Center for Economic Transformation in Accra. However, as with previous plans, many of which also addressed key problems, Ghana has found itself in crisis again.
The last time Ghana sought IMF assistance was in 2015, and within three years, the country was on a path to repaying the loan and was one of the world’s fastest-growing economies. Ghana was held up as a model for the rest of Africa.
Agricultural production was on the rise, and major exports like cocoa, oil, and gold were surging. The country invested in infrastructure, education, and initiated a cleanup of its troubled banking industry.
Despite the IMF’s blueprint, Ghana once again faces dire straits. The IMF loan agreement, along with the disbursement of a $600 million installment in May, has helped stabilize the economy, mitigate wild fluctuations in currency exchange rates, and restore a semblance of confidence. Inflation remains above 40 percent but has decreased from its peak of 54 percent in January.
However, despite the IMF’s guidance, Mr. Tsikata, a former division chief at the IMF with three decades of experience, believes that the chance of Ghana avoiding a similar crisis in a few years “rests on a wing and a prayer.”
The looming threat of catastrophic climate change adds another layer of complexity to the problem. Within the next decade, a United Nations analysis estimates that trillions of dollars in new financing will be required to mitigate its impact on developing countries.
As of the end of 2022, Ghana’s government owed $63.3 billion, not only to foreign creditors but also to domestic lenders, including pension funds, insurance companies, and local banks. The IMF made settling this domestic debt a prerequisite for a bailout, resulting in a partial restructuring, which reduced returns and extended due dates but also undermined confidence in the banks.
Foreign creditors, including China, represent thousands of private, semi-public, and governmental entities with varying objectives, loan arrangements, and regulatory controls.
The type and magnitude of Ghana’s debt make this crisis deeper and more complex than previous economic difficulties the country has faced.
The proliferation of lenders characterizes the debt burden facing distressed countries worldwide, making it more intricate and challenging to resolve.
In Makola Market, Victoria Chrappah runs a narrow stall where lines of vendors sell live chickens, toilet paper, and electronic chargers from baskets balanced on their heads.
As negotiations continue with foreign lenders, households and businesses in Ghana are struggling to cope. Chrappah has been selling imported home goods for over two decades.
Last year, inflation surged, and the Ghanaian cedi lost more than half its value against the U.S. dollar. This currency depreciation affected consumers and businesses heavily as Ghana imports almost everything, from medicine to cars.
The Bank of Ghana raised interest rates to combat inflation, impacting businesses and households relying on short-term borrowing or investment. The benchmark rate now stands at 30 percent.
Due to the rapidly depreciating currency, pricing instability became a challenge. Doreen Adjetey, product manager for Dalex Swift, a finance company in Accra, highlighted the soaring costs of everyday items.
A bottle of Tylenol to soothe her child’s teething pain cost 50 cedis last year, now it’s 110. A month’s worth of groceries surged to over 3,000 cedis from 1,000. As a result, Adjetey’s family’s monthly income, once a comfortable 10,000 cedis, has lost its value substantially.
Default rates for small and medium-sized enterprises have skyrocketed, jumping from 30 percent to 70 percent.
The real estate and construction market has also slumped, particularly in the first-time buyer segment.
Ghana’s government grapples with a dire financial situation, and finding a solution to the debt crisis remains an urgent challenge.
Before sustainable solutions to the debt crisis can be achieved, the question of where developing countries can secure the necessary low-cost investment capital to support growth must be answered.
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