top of page

The Ghanaian economy is on the brink of bankruptcy despite a $3 billion bailout from the IMF

It is sometimes hard to believe that the improbable could one day happen. Who would have thought one day that the Ghanaian economy would essentially go bankrupt? Over the last two decades, Ghana became a beacon of democracy in West Africa, and the second-largest economy in the region after Nigeria.

However, due to a set of bad economic decisions, the Ghanaian economy has dug itself into financial holes that it can’t get out of. And now, the credibility of the Ghanaian economy in the international debt market is completely tarnished, and the Ghanaian economy is in shamble. What has happened?

In December 2022, Ghana defaulted on billions of dollars owed to foreign lenders. The government was then forced to turn to the International Monetary Fund (IMF) for a $3 billion bailout. However, this bailout was not enough to prevent Ghana from essentially going bankrupt.

There are a number of reasons for Ghana's bankruptcy. One reason is the country's high level of debt. Ghana's public debt-to-GDP ratio is currently over 80%, which is well above the sustainable level for a developing country. Another reason for Ghana's bankruptcy is the country's weak economic growth. Ghana's economy has grown slowly in recent years, and the COVID-19 pandemic has only made things worse. Ghana's economy has been hit hard by the global economic shocks caused by the COVID-19 pandemic and the war in Ukraine. These shocks have led to rising inflation and interest rates, which have made it more expensive for Ghana to borrow money and service its debt.

The IMF has extended the loan, and it is expected to help Ghana stabilize its economy and restructure its debt. However, it is important to note that the bailout will come with conditions, such as austerity measures and reforms. It is also important to note that the success of the bailout will depend on a number of factors, including Ghana's ability to implement reforms and the global economic environment.

Can Ghana truly payback the loan? The honest answer is no. The Ghanaian economy is far too weak to even attempt paying back the loan to the IMF. For Ghana to pay back the loan, the Ghanaian government will either have to increase taxes on its citizens and corporations, impose tariffs on imported goods, increase its exports, or simply borrow more to pay back the existing loan due to the IMF, but who would who want to lend more money to a nation that has already defaulted?

The purchasing power of the Ghanaian people is too weak to increase taxes on them since the Cedi has depreciated considerably. Imposing tariffs will make the cost of these imported goods more expensive for Ghanaian consumers. Even if Ghana successfully increase its exports, this success will be short-termed because since Ghana does not manufacture its commodities, it will end up paying more for the same commodities that it sold initially for cheap. This means that Ghana’s balance trade will be in deficit for a long time. As was aforementioned, it would be suicidal for Ghana to get a new loan to payback an existing loan. This will only depreciate the value of the Ghanaian Cedi, make Ghanaian citizens even poorer, and it could simply ruin its economy.

In the meantime, Ghana's bankruptcy is having a devastating impact on the country's people. Many Ghanaians are struggling to make ends meet, and the country is facing a humanitarian crisis. While the IMF bailout’s extension is a necessary step to keep the Ghanaian economy on life support, but it will not be enough to solve Ghana's problems. The country will need to implement reforms and address its underlying economic problems in order to achieve sustainable economic growth and prosperity.


Avaliado com 0 de 5 estrelas.
Ainda sem avaliações

Adicione uma avaliação

Subscribe to The Lake Street Review!

Join our email list and get access to specials deals exclusive to our subscribers.

Thanks for submitting!

bottom of page