A NEW report, jointly published by seven organizations, has revealed that Ghana is in a debt crisis because the country is losing around 30% of government revenue in external debt payments each year.

It attributed the situation to a combination of the recent fall in the price of commodities and the loans not being used well enough to ensure they could be repaid.

The authors said such huge payments are only possible because Ghana has been able to take on more loans from institutions, such as the International Monetary Fund (IMF), which are used to pay the interest on debts to previous lenders, whilst the overall size of the debt increases.

According to the report, the IMF estimates that the Ghanaian government’s external debt payments in 2016 will be 29% of revenue, which is well above the 18–22%, that the IMF normally regards as the upper limit of sustainability payments. The situation is expected to stay well above 20% of revenue until, at least, 2035.

The report noted that this is only considered possible due to a combination of very optimistic expectations and requirements for large spending cuts and tax increases, the very things the IMF has been criticising the European Union for, especially in the case of Greece.

Ghana’s debt crisis

It explained that Ghana’s crisis is the result of a gradual increase in lending and borrowing off the back of the discovery of oil and high commodity prices.

“More money was then borrowed following the fall in the price of oil and other commodities since 2013, to try to deal with the impact of the commodity price crash, whilst the relative size of the debt also grew because of the fall in the value of the cedi against the dollar.

“The underlying causes of the return to a debt crisis are, therefore, the continued dependence on commodity exports, as well as borrowing and lending not being responsible enough, meaning that new debts do not

generate sufficient revenue to enable them to be repaid,” it added.

The report is titled ‘The Fall and Rise of Ghana’s Debt: How a New Debt Trap Has Been Set’ and was published this month.

The report was jointly published by the Integrated Social Development

Centre Ghana, Jubilee Debt Campaign UK, SEND Ghana, WAZOBA Ghana, All-Afrikan Networking Community Link for International Development, Kilombo Ghana and Abibimman Foundation Ghana.

Jubilee Debt Campaign is part of a global movement demanding freedom from the slavery of unjust debts and a new, financial system that puts people first.

Cedi’s fall wipes out $11.8b of economy

The report noted that since the start of 2013 the value of the Cedi against the dollar had fallen by 50% and this had caused the dollar-denominated size of Ghana’s economy to fall from $47.8billion in 2013 to $36billion in 2015.

The report explained that because external debts are owed in dollars or other foreign currencies, this had, in turn, increased the relative size of the debt and debt payments.

Cedi’s fall hikes external debt to GDP

It revealed that external debt had grown from $14.7billion in 2013 to $21.1billion in 2016, an increase of 44% yet because of the depreciation of the Cedi, external debt had gone up from 30% of GDP in 2013 to an expected 56% in 2016, an increase of 87%.

$18.2b loans from 2007 - 2015

In total, between 2007 and 2015, there were $18.2billion of external loans and $8.7billion of debt payments, leaving $9.5billion of the additional borrowing to be spent within Ghana.

Little transparency in loan utilisation

There is little transparency on what the loans were used for from both the government and lenders.

The IMF figures on public capital formation show no relationship with the increase in lending, suggesting that whilst some loans could have been used for investment, the increase in lending did not lead to an increase in investment.

For every GH¢1 increase in income for the poorest 10%, the incomes of the richest 10% increased by more than GH¢9.

The authors of the report argue that at the moment, all the costs of the crisis are being born by the people of Ghana, and none by the lenders.

Lenders accused

In their view, this is unfair, adding that lenders should carry their share of the cost of any irresponsible lending and of the change in circumstance caused by the fall in commodity prices.

Additional action is also needed in order to prevent a repeat of Ghana’s crisis, including changes on the part of the government and lenders, to ensure that loans are well used and that more of the revenue generated by the economy is turned into government revenue by taxation.

The people of Ghana should not have to bear all the suffering of a crisis caused by government policy, irresponsible lenders, and global economic shocks, especially when speculators continue to extract large profits from the country.


1. Conduct a debt audit

Government should publicly reveal how much debt there is, who loans were given to, what they were for, including whether for projects or general budget support and on what terms.

Establish an independent debt audit commission made up of domestic and international experts and give it access to all the information needed as well as analysing all the terms of loans and their costs and benefits. A debt audit commission could propose new accountability mechanisms on government and lenders to ensure that where loans are given, they are well used,

Lenders should:

Publicly reveal all the loans they have given, what they were for and on what terms.

Commit to working with an independent debt audit commission should one be established.

2. Make lending and borrowing more productive and accountable.

The Ghanaian government should:

• Fully implement the Public financial management Act 2016

• Publicly release all documents concerning new loans and any projects they are funding before contracts are signed so that they can be scrutinised by the media, parliamentarians and civil society organisations.

• Ensure parliament scrutinises and approves new, loans and or projects before contracts are signed.

• Ensure projects are independently evaluated before, during and after their duration.

• Consult on and publish a debt strategy, which fits with the national development plan.

Lenders should:

Require all of the points above to be implemented before agreeing a loan.

The UK and other major jurisdictions under which debt is issued should:

Pass a law that requires all loans issued under their jurisdiction to governments or with government guarantees are publicly disclosed at the time the loan is given, otherwise the debt will be unenforceable under that jurisdiction’s law.

3. Make adjustment

The Ghanaian government should:

• Protect all vital public spendin, such as on healthcare and education, social services, welfare protections, and key economic infrastructure.

• Increase tax revenues from large companies and rich individuals, including by ceasing to grant tax waivers, including for public private partnership projects, and increasing the capacity of tax collection authorities to ensure existing laws relating to issues such as transfer mispricing are implemented.

Other governments should:

• Agree to the creation of a tax body to coordinate global tax rules as proposed by developing countries at the UN in order to ensure such rules reflect the needs of developing countries.

• Agree to renegotiate bilateral tax treaties with Ghana to ensure the Ghanaian government is receiving a fair level of tax

4. Hold a debt conference

The Ghanaian government should:

• Request support from UNCTAD with the organisation of a debt conference.

• Call a debt conference with all creditors with the aim of agreeing burden sharing to get debt payments down to a sustainable level.

• Discuss with other governments in similar situations whether a joint conference or coordinated actions would be useful.

Lenders should:

Commit to taking part in a debt conference to agree debt restructuring to get debts down to a level assessed as consistent with meeting the Sustainable Development Goals by an independent expert such as UNCTAD

• Some private creditors may refuse to abide by the outcome of any conference.

• All the dollar denominated bonds are owed under English law and we suspect other private commercial debt is too

Therefore, the government should:

Commit to passing legislation to ensure that the agreed outcomes of any conference are enforced on private creditors „who refuse to comply

Default or threaten to default on some of the debt

The Ghanaian government should:

• Make a clear commitment to paying domestic debt, including ahead of other debt.

• Investigate whether it can reintroduce the rule preventing cedi denominated domestic debt being bought by external actors, thereby maintaining a clear distinction between domestic and external debt.

• For any external debt which is issued in the future, try to denominate it in cedis to prevent exchange rate risk.

• Consider defaulting on the private debt which speculators lent irresponsibly and are not expecting to be repaid and on which significant interest has already been paid. Or at the very least threaten to default on these private external debts so as to motivate creditors to come to the table and agree to better terms or to take part in a debt conference to negotiate a comprehensive debt restructuring

The IMF should:

• Accept that its expectations of Ghana’s economy are over optimistic and place all the burden on the people of Ghana and none on the lenders.

• State that it will continue to lend if Ghana defaults on the private external debt.

• Require a restructuring of all of Ghana’s external debt before a certain date ideally through a comprehensive debt conference, in order to incentivise private and other creditors to negotiate.

The government should:

Pass legislation to make it easier for debts owed under English law to be restructured.

This could include introducing a collective action clause across all private external debt owed under English law both bonds and non-bonds and or restricting how much can be claimed in a court to the amount a creditor paid for the debt šas the Belgian Vulture Fund law of 2015 does.

Cancel unjust debts

The world Bankshould:

• Cancel at least 46%1.4billion›of the debt it is owed by Ghana on the basis that these loans should never have been made under its own rules, and that 25 of the debt is owed on projects here the World Bank rated its own performance as less than satisfactory.

• Comply with its own policy and only give grants to Ghana whilst it is at high risk of debt distress.

• Review whether it is complying with its own policy for all other countries with a Debt Sustainability