The Ghanaian government is on the brink of bankruptcy as it grapples with paying off billions in debt to international creditors.
To stabilize Ghana's economy during the financial crisis and mounting debts, the IMF provided a $3 billion loan.
Ghana's future financial stability is a concern due to the ongoing debt crisis, which is connected to COVID-19, geopolitical events, and increasing food and fuel prices.
In December, the Ghanaian government declared bankruptcy as it couldn't pay billions of dollars owed to international creditors.
The New York Times reported that President Nana Akufo-Addo's administration had to accept a $3 billion loan from the International Monetary Fund as Ghana faced a financial crisis. This crisis was characterized by government organizations owing billions to contractors and being heavily in debt.
The media outlet highlighted that the financial crisis has had widespread impacts, leading to contractor layoffs and worsening unemployment in the country.
Emmanuel Cherry, the chief executive of an association of Ghanaian construction companies, recently disclosed that government back payments to contractors amounted to a staggering 15 billion cedis, or roughly $1.3 billion, before interest.
The reports also revealed that the Ghanaian government owes independent power producers a staggering $1.58 billion, putting the country at risk of widespread blackouts.
"The government is essentially bankrupt. It was the 17th time Ghana has been compelled to turn to the fund since it gained independence in 1957. This latest crisis was partly prompted by the havoc of the coronavirus pandemic, Russia’s invasion of Ukraine, and higher food and fuel prices,” the report read in parts.
The IMF came up with a detailed rescue plan to tackle Ghana's debt, which includes controlling spending, boosting revenue, and safeguarding vulnerable groups while negotiating with foreign creditors.
The upcoming United Nations General Assembly will focus on the issue, along with the growing debt load for developing nations, estimated to exceed $200 billion. The recent IMF loan has helped stabilize the economy, reducing currency swings and boosting confidence, despite inflation still being around 40% (down from its peak of 54% in January).
While the IMF's program tackles key concerns, Tsidi Tsikata from the African Centre for Economic Transformation in Accra raised doubts about Ghana's ability to avoid future financial challenges.