Test Debt Guide

Country Debt Guide
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ghana
Current Financing Challenges
WHAT DOES GHANA STILL NEED TO FINANCE?
SOME EXAMPLES:
ACCESS TO ELECTRICITY FOR 18% OF THE POPULATION
ACCESS TO DRINKING WATER FOR 64% OF THE POPULATION
ACCESS TO INTERNET FOR 62% OF THE POPULATION
IMPROVING PORT INFRASTRUCTURE BY 22% TO REACH CHINESE LEVELS
IMPROVING ROAD INFRASTRUCTURE BY 48% TO REACH CHINESE LEVELS
Although Ghana is classified as a middle-income country, as noted above the IMF does assess Ghana’s debt
position. Despite its pre-pandemic debt assessment, the IMF has revised its assessment of Ghana in late 2020 to at
high risk of debt distress. The Jubilee Debt campaign has also classified Ghana as being IN a debt crises. However,
as is also clear from above, Ghana has some significant financing needs in order for the population to achieve basic
standards of life and poverty reduction, in particular ensuring access to water and internet, some of which may not
be met through domestic financing alone.
The Ghanaian government devotes a significant share of expenditure to servicing debt, with debt interest
accounting for a quarter of total government spending as of 2018 (its lowest since 2015). It has the highest relative
cost of debt service out of the all countries analysed in this report. At over quadruple the share of health spending,
debt service could represent a potentially high opportunity cost IF the projects being funded by loans are not
helping raise citizen’s standards of living or generating a return. Indeed, the country’s interest bill has grown over
three-fold to 6.15% in 2018 since the early 2010s – due to a greater reliance on commercial rather than
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concessional loans.
Since the late 2010s, Ghana has embarked on market financing by issuing Eurobonds to diversify funding sources
and reduce dependence on aid. However, as a consequence, the country has become increasingly vulnerable to
fluctuations in investment appetite. In particular, the depreciation of the Ghanaian cedi by 17.4% against the dollar
in year-on-year terms as of 2019 has made Ghana’s dollar-denominated external debt – and by extension the cost
of serving this debt – relatively more expensive. This could have contributed to higher yields because investors
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demand greater compensation for rising debt vulnerability. For these reasons, the IMF has concluded that
Ghana’s risk of debt distress is high, while the Jubilee debt campaign predicts a debt crisis for Ghana in 2020.
The COVID19 Impact
The pandemic is expected to slow economic growth in Ghana down to 1.2% in 2020 in line with the African
Development Bank’s ‘worst case’ scenario. Partly this is because Ghana has made a robust economic response to
the pandemic - by September 2020, the government in Ghana had budgeted approximately $1.9 billion (2.9% of
GDP) to mitigate these effects and also for Covid-19 health needs. This included social assistance that was
intended to reach approximately 11.2 million people (3.6% of the population) through the Livelihood
Empowerment Against Poverty cash assistance programme. The government also subsidized utility bills for
several months as well as creating a trust fund and a private sector fund to mitigate the impact on livelihoods and
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businesses.