Ghana’s debt crisis worse than IMF expected, as lenders continue to profit

The IMF has completed the fourth review of its programme in Ghana, agreeing to disburse a further $95 million of loans, taking total loans to $565 million. The IMF has also agreed to extend loans for an additional year, from 2015-2019, rather than the original 2015-2018. These loans, which effectively pay the interest to previous lenders to Ghana, come despite Ghana’s debt situation being worse than expected two years ago. Ghana’s debt crisis was triggered by the fall in prices for its commodity exports from 2013, and increases in the value of the US dollar.

Independence Arch in Accra, capital of Ghana (Joe Ronzio / Flickr)
Independence Arch in Accra, capital of Ghana (Joe Ronzio / Flickr)

In 2015, when the IMF began its loans, it expected that Ghana’s government debt would be 65% of GDP by 2017 and falling, but now it is 73% and still rising. This comes after economic growth was 13.8% in total across the three years 2015-2017 (4.4% a year) rather than the expected 20.3% (6.4% a year).

External government debt payments are now expected to be 42.4% of government revenue in 2017, almost 50% higher than the 28.6% predicted by the IMF in 2015. Such payments are expected to average 36.8% between 2017 and 2019, well over the 18-22% that the IMF normally regards as sustainable (and the 22.8% expected at the start of its bailout programme).

In 2016 the Jubilee Debt Campaign, alongside Ghanaian organisations including Isodec, SEND Ghana and Vazoba, warned that the IMF’s projections for Ghana were over-optimistic, and that Ghana needed a reduction in its high interest debt to external private creditors, rather than more government cuts in essential services.

However, in response to Ghana’s debt situation being worse than expected two years ago, the IMF calls for more “fiscal consolidation” – ie, government spending cuts. Meanwhile it and the World Bank continue to give more loans, enabling the high interest debt to external private creditors to be paid. This is making large profits for lenders to Ghana, who are not having to pay for any of the impact of the fall in commodity prices and increased value of the dollar which have hit Ghana. Those costs continue to be borne by the Ghanaian people in full.

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