Ghana has been categorized by the World Bank as a high debt distress country because by the end of 2022, the country’s debt to GDP is expected to be 104.6%.
According to its October 2022 Africa Pulse Report, a widening government deficit, a considerable depreciation of the cedi, and growing debt payment expenses all predicted that Ghana’s debt would increase dramatically from 76.6 percent a year earlier.
Additionally, it predicts that in 2023 and 2024, the debt-to-GDP ratios would be 99.7% and 101.8%, respectively.
Ghana’s GDP is predicted to be $72 billion in size, and this year, debt service would take up around 70% of the country’s income.
The report is coming at a time the Bank and the International Monetary Fund (IMF) are conducting a Debt Sustainability Analysis on the country. A country which is highly debt distressed is unable to fulfil its financial obligations and therefore debt restructuring is required.
“Debt is expected to jump in Ghana to 104.6 per cent of GDP, from 76.6 per cent a year earlier amid a widened government deficit, massive weakening of the cedi, and rising debt service costs.
The country’s debt is expected to remain elevated at 99.7 per cent and 101.8 per cent of GDP in 2023 and 2024, respectively.
“Tightening of financial conditions globally along with the fall of the domestic currency widened the sovereign spread by 233 basis points since December 2021,” it said.
“As a result, the country lost access to international markets,” the report mentioned.
The World Bank further stated that Ghana needed $1.5 billion in assistance from the IMF, which could help to shore up public finances and regain access to credit markets.
It added, “Nevertheless, despite the negotiation with the IMF, investors remain nervous about the country’s debt sustainability.”
These concerns, it said, were expressed by the country’s local and foreign currency ratings downgrade from B-/B to CCC+/C, adding, “as a result, despite the news, the cedi fell further with ripple effects on inflation”.
