Covid-19, Russia-Ukraine war exposed Ghana’s fiscal recklessness

The economist, in an interview on the Citi Breakfast Show, said the nation, particularly in the past 10 years, was on a path that “was clearly unsustainable.”

“Our expenditure patterns kept increasing, and our gap and deficit had to be financed from external sources.”

“The point is that we have been living recklessly, over the last 10 years, our fiscal finances have been pretty much in shambles. If we recall, during the Covid-19 pandemic, we were told that those who died the most were those with underlying health conditions. In our case, what the pandemic and Ukraine war have done is to expose our fiscal diabetes.”

“We had an underlying ailment in terms of our borrowing and living unsustainably, and these two have exposed them, resulting in where we find ourselves,” he explained.

Ghana’s debt-service costs in the first half amounted to GH¢20.5 billion, equivalent to 68 percent of tax revenue.

An IMF team is in Ghana until October 7 to continue discussions with the government on policies and reforms that a lending arrangement could support.

The meeting with the IMF comes amid concerns that Ghana is about to start talks with domestic bondholders on a restructuring of its local-currency debt.

News reports indicate that major local investors, including local banks and pension funds, are preparing to discuss debt reorganisation.