Adnan Adams Mohammed
The African Development Bank’s newest report, the 2023 West Africa Economic Outlook, ranked Ghana’s external debt to GDP of about 39.5 percent recorded in 2022 as 10 percent higher than the West African average of 29.6 percent.
Ghana’s external debt stood at $29.0 billion as at the end of December 2022, ranking sixth highest on the continent.
However, countries such as Cape Verde, Senegal and Niger that have high external debts to GDP are not in distress, but Ghana is the only ECOWAS country, in debt distress.
“West Africa’s external debt increased from an average of 13.8% of GDP in 2014 to 29.6% in 2022. The debt accumulation was facilitated by a rise in the issuance of Eurobonds. Eurobonds have been issued by Côte d’Ivoire, Ghana, Nigeria, and Senegal since 2011, and by Benin since 2019”, the West Africa Economic Outlook 2022 noted.
External debt accounts for the largest proportion of the total public debt portfolio in most countries except Nigeria and Togo in the sub-region.
Meanwhile, the Report explained that, the external debt accumulation was facilitated by a rise in the issuance of Eurobonds. This suggested that exchange rate depreciation as well as the current normalization of monetary policy across the world, were important risks for these countries.
It furthered that the key drivers of external debt dynamics in West Africa were the rapid exchange rate depreciation, especially in commodity-exporting countries as well as high primary fiscal deficits and weak economic growth caused by the COVID-19 pandemic in 2020 and Russia’s invasion of Ukraine in 2022.
“Higher nominal interest rates due to the current tightening of monetary policy in advanced economies have also contributed significantly to higher debt burden in the region. Projected higher economic growth and efforts to reduce the fiscal deficit through domestic resources mobilization, fiscal consolidation and spending restraint are expected to contain external debt accumulation in the region in the medium term”, it added.
Therefore Ghana’s economic challenges may not be only due to the high debt burden, but rather a myriad of issues.
