Why Ghana's Debt Restructuring is not surprising: In truth, it is long overdue

Ghana's vulnerability to external shocks like commodity price volatility, global economic headwind and fiscal recklessness is well documented. To put things in perspective, Ghana has sought for an IMF bailout 16 times since its independence in 1957 and is currently in the process of securing a 17th bailout. 

However, things are much dire this time round due to an unsustainable public debt. The IMF and World Bank Debt Sustainability Analysis indicates that the country's Debt-to-GDP ratio is approximately 105%, a figure that includes contingent liabilities on all state institutions. The Bank of Ghana on the other hand put this value at 93% (excluding state-owned enterprises and special purpose vehicle debts). 

Key events contributed to the current economic malaise the country is experiencing. The government and state actors would like everyone to believe that the problem is solely attributable to COVID-19 and the Russia-Ukraine war that have elevated cost of living, with dire consequences for the Ghanaian economy. 

Civil society organisations and the opposition parties lay the blame squarely at the doorstep of government's expansionary and "untested" tested policies like Free Senior High School (FSHS), One-Village-One Dam(1V1D), One-District-One-Factory (1D1F) and Planting for Food and Jobs (PFJ). Critics believe that the poor performance of the sectors these policies are supposed to boost in evidence enough of the poor performance.

A faltering Debt Restructuring Programme

The debt restructuring called the Domestic Debt Exchange Programme (DDEP) seek to exchange about GHS 137 billion (US$ 11.4 billion) Ghana's domestic debt for new bonds that will coupon and maturity decimated is several bonds (12 at the last count) spread over several years up to 2037. As anticipated there was a lot of push back from domestic investors especially the individual bondholders, who were initially exempted when the DDEP was rolled out but only to be roped in prior to 2023 after pension funds through public servants got some relief.