Former BoG Deputy Governor says debt assessments failed to fully capture Ghana’s path to crisis
Years before Ghana entered debt distress and defaulted on parts of its obligations in 2022, warning signs were already emerging across the economy. But a new policy paper by former First Deputy Governor of the Bank of Ghana, Dr Maxwell Opoku-Afari, argues that existing debt assessments did not adequately reflect how quickly those risks could escalate into a full-blown crisis.
In a study published by the Finance for Development Lab (FDL), Dr Opoku-Afari contends that while IMF and World Bank debt sustainability assessments consistently flagged Ghana as vulnerable, they continued to treat the country’s debt as manageable under assumptions that proved difficult to sustain.
The paper points to a sharp deterioration in key indicators over the past decade. Public debt rose rapidly after 2014, debt-servicing costs consumed an increasing share of government revenue, and external obligations placed growing pressure on foreign reserves. By 2022, debt-service burdens had climbed to levels that significantly constrained the government’s fiscal space.
A major concern highlighted in the study is the changing nature of Ghana’s debt. As borrowing increasingly shifted to the domestic market, banks, pension funds, insurance firms and other investors became heavily exposed to government securities. According to the paper, this development created new vulnerabilities that traditional debt frameworks were not fully designed to capture.
Rather than reducing risk, the strategy concentrated it in different parts of the economy. Rising interest costs, short-term refinancing needs and the country’s continued exposure to foreign-currency debt left public finances vulnerable to exchange-rate shocks and higher borrowing costs.
Dr Opoku-Afari argues that debt assessments relied too heavily on expectations of fiscal discipline, stronger revenue mobilisation and sustained economic growth. He also suggests that the links between government borrowing and financial-sector stability received insufficient attention, while deeper structural challenges such as energy-sector inefficiencies and weaknesses in state-owned enterprises remained largely unresolved.
The paper further notes that Ghana’s current IMF programme is the country’s 17th in roughly six decades, raising questions about why periods of economic stabilisation have repeatedly been followed by renewed fiscal difficulties.
Drawing broader lessons for African economies, the study calls for debt surveillance frameworks that place greater emphasis on domestic debt risks, refinancing pressures and financial-sector exposure. It argues that future assessments should go beyond debt levels alone and focus more closely on how governments would cope with rising interest rates, currency depreciation and sudden shifts in investor confidence.
Source: citinewsroom
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