Ghana has been classified as a high debt distressed country, according to the World Bank.
The Bank’s October 2022 Africa Pulse Report, Ghana’s rising debt-to-Gross Domestic Product (GDP) is now projected to reach 104 percent by the end of this year.
This would represent an increase from 76.6 percent a year earlier with the report attributing the development to the depreciation of the cedi, widening government deficit and rising debt service costs.
It further attributed Ghana losing its access to international capital markets as another contributing factor.
“Debt is expected to jump in Ghana to 104.6% of GDP, from 76.6% a year earlier amid a widened government deficit, massive weakening of the cedi, and rising debt service costs," the report noted.
The country’s debt is expected to remain elevated at 99.7% and 101.8% 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 added.
The forecast by the World Bank comes within a period where Ghana has commenced negotiations with the International Monetary Fund for an economic support programme.
Ahead of the possible programme, officials from the Fund are conducting a Debt Sustainability Analysis for Ghana which is a key requisite exercise for the country which is facing a heavy debt burden.
But the World Bank said despite Ghana's target of accessing $3 billion from the Fund to restore macroeconomic stability and shore up public finances, “investors remain nervous about the country’s debt sustainability.”
It however highlighted these concerns on the back of recent economic downgrades by international credit rating agencies such as Fitch, Moody’s, Standards and Poors’ into deeper junk status.
The agencies on their part cited recent macroeconomic deterioration, further heightening of the government’s liquidity and debt sustainability difficulties as well as increasing risk of default as reasons.