Ghana: Soaring Public Debt and Democratic Challenges

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A recent study on Africa’s public debt argues that debt can be beneficial to countries if invested well in sectors such as education, health, transportation, and other important areas, as the value of global capital in socio-economic development cannot be underestimated. Unfortunately, the beneficial aspect of debt has not been the case for African countries. Like many countries on the continent, Ghana is facing soaring public debt, which has become a source of worry for experts in terms of the implications for the country’s democratic future.

As discussed in a recent piece on Africa’s debt challenges, the continent’s debt in absolute terms is lower than other regions of the world. In fact, the total debt stock owed by all African governments is estimated at $1.8 trillion in 2023, while Germany alone has a total debt stock of about $2.9 trillion. Yet, many African countries, including Ghana, are among the countries listed by the IMF as being in “debt-distress” in 2023. What explains Ghana’s soaring debt and what are the likely implications for the country’s democratic future? We attempt to address this important question in this article. We start by first exploring the trends in Ghana’s public debt and end the article by looking at the implications of the rising debt on the country’s democracy.

Trends in Ghana’s public debt

Ghana’s position as the first Sub-Saharan African country to gain independence from colonial rule on 6th March 1957, under the leadership of Kwame Nkrumah, did not only elevate the country’s status as the Black Star of Africa, but in addition at independence the country had good foreign reserves of about US$481 million with its GDP at par with both Malaysia and South Korea. While Ghana’s industrialization efforts by its first President Kwame Nkrumah were well-intended, the speed at which the industrialization agenda was pursued with heavy foreign borrowing marked the starting point of Ghana’s public debt challenges. Not only were industrial plants and equipment financed largely by foreign supplier credits under Nkrumah’s administration, but the reliance on these foreign credits with short maturity terms increased Ghana’s debt problems by the early 1960s.

Ghana’s external debt increased from what some observers describe as almost nothing at independence to nearly US$600 million at the end of 1965, as export earnings from cocoa and other natural resources declined. It was therefore not surprising that Ghana began to face sovereign debt repayment problems by the end of 1965. This was resolved through debt-rescheduling agreements in 1966, 1968, and 1970. Ghana also faced protracted economic decline throughout the 1970s with frequent military coups and the mismanagement of the economy. The long years of Jerry Rawlings’ populist revolution in the 1980s and his efforts to restructure Ghana’s political and economic systems, produced two major outcomes. First, the adoption of the Economic Recovery Programme (ERP), which helped to rescue Ghana from economic collapse in the early 1980s. Second, while the recovery programmes reversed the decline of the economy by stabilizing prices with improved economic outcomes, substantial capital inflows resulted in a sharp increase in the country’s debt. Ghana’s debt stock increased from US$2 billion in 1983 when the ERP began to about US$ 3.5 billion at the end of 1990. 

Reaching crisis point

Public debt reached a crisis point by year 2000 as John Kufour’s government decided to adopt the Heavily Indebted Poor Countries Initiative (HIPC). Ghana’s total debt not only declined to about US$780 million or 25% of GDP by the time the HIPC ended in 2006, but the country’s combined (foreign and domestic) debt rose to US$63.3 billion at the end of 2022. Three explanations are advanced to explain the soaring debt. First, the energy sector debt owed to the country’s power producers and suppliers. Second, the financial sector clean-up undertaken by the Central Bank. Third, the impact of the Covid-19 pandemic, Russia’s invasion of Ukraine, and subsequent higher food and fuel prices. While the importance of these factors cannot be ignored, both experts on Ghana and many ordinary Ghanaians are acutely aware that government overspending, high levels of corruption, mismanagement, and the ineptitude of political leaders are key contributors to the country’s soaring debt.

As the New York Times recently described it, Ghana, under President Nana Akufo-Addo, is essentially bankrupt and had to turn again to the IMF for a $3 billion loan, the 17th time the country has gone to the IMF for financial support since 1957. The ramifications are being felt in the country, with increasing protests against the high cost of living and concerns raised about potential implications for the country’s democratic future.

Why should Ghanaians care about the soaring public debt and the country’s democratic future? In recent weeks, Ghanaians have exercised their democratic rights with peaceful protests at the high cost of living. The unprecedented financial crisis has stimulated a popular response, highlighting perceived inadequacies of the Bank of Ghana and associated government failings. In early October, hundreds of protesters demonstrated on the streets of the capital Accra, demanding that the governor of the Bank of Ghana and his two deputies resign following the loss in the 2022 financial year of about 60bn Ghanaian cedis (USD5.2bn; £4.3bn). The opposition National Democratic Congress (NDC) party, led the demonstration, known as #OccupyBoG. Protesters dressed in red and black, symbolizing mourning/suffering in Ghana. They chanted “stop the looting, we are suffering.” The demonstrators’ claim was that the bank printed money illegally at the behest of the government, resulting in the cedi’s depreciation and annual price inflation of around 50%.

Protest politics

#OccupyBoG claimed that the central bank governor, Dr Ernest Addison, was guilty of recklessness and mismanagement, because of the USD5 billion unprecedented loss. High inflation, according to the World Bank, meant that around 850,000 Ghanaians have become impoverished due to the effect of high price inflation on their purchasing power in relation to basics: food, fuels and utilities.

While the #OccupyBoG demonstration attracted the attention of Ghana’s media, and there was much support for the protests, it does not seem likely that such public demonstrations – more are planned, as well social media posts, press conferences, and media reports – would stimulate sustained extra-parliamentary opposition. This is partly because the government is likely, as it has done in the past, to arrest leaders and ban further demonstrations via court decisions. But this does not imply that #OccupyBoG did not focus the anger of many Ghanaians at the state of democracy in the country. A former Chief of Defence Staff of the Ghana Armed Forces and erstwhile member of Flt-Lt Jerry John Rawlings’ Provisional National Defence Council, Brigadier Joseph Nunoo-Mensah, stated earlier in July 2022 that he believed there was a risk of a ‘big explosion’ in Ghana. Referring to the Arise Ghana demonstration the previous month, Nunoo-Mensah feared that “someone with the character traits” of Jerry Rawlings would emerge “to save starving citizens … Another Rawlings is going to get up and cause a big mess, bigger than Rawlings’ mess. If people are hungry…I get calls…people are hungry…This is not a small issue”.

Nunoo-Mensah’s comments were dismissed by the government and Ghana’s state-owned media. Ghanaians were not so sure that his concerns were groundless. Seeking to gain a snapshot of what people thought about the likelihood of a coup d’état à la Rawlings, one of the authors of this article personally spoke to friends and colleagues in Accra, Kumasi and via Zoom from the UK. Most believed that Nunoo-Mensah’s fears were not groundless – while also thinking that a Rawlings-style coup was unlikely. Opinion was that the incumbent government, in power since January 2017, would lose the December 2024 presidential and parliamentary elections, in the context of ongoing economic crisis, perceptions of eyewatering government corruption, and a general pessimism about the state of the country.

Regaining public trust

In addition, and more generally, many Ghanaians might agree that the values and legacy of former president Jerry John Rawlings – that is, social justice, equality and probity – are absent in today’s Ghana. This is a wider concern expressed by social protest movements, such as Arise Ghana and #OccupyBoG, which serve to highlight and fuel popular fears and frustrations at democratic shortfalls and serious economic problems. These self-same issues were at the forefront of concerns when Rawlings and his comrades staged a successful coup d’état on 31 December 1981. It remains to be seen if history will repeat itself and Ghana will again find itself embroiled in prolonged social, political and economic turmoil as a result of governmental failings.

The likelihood however seems small. Since the early 1980s, political radicalism, once focused in the junior ranks of the armed forces, has been tamed and controlled by successive governments. The growing appreciation of democratic values by the Ghanaian populace and the deepening democratic institutions could serve as guardrails from any military adventurism. At the same time, it is imperative for Ghanaians to keep promoting the culture of political accountability to help sustain its democracy.

Our overall assessment is that it is highly unlikely that there will be a military coup in Ghana; not least because most Ghanaians value democracy and few would want to see it replaced by unelected military rule. On the other hand, this does not imply that Ghanaians are happy with the status quo. The government needs to do much more – and quickly – to try to regain public trust.

Felix Kumah-Abiwu is an Associate Professor and Director of the Center for African Studies at Kent State University in Ohio, USA. He is the co-editor ofJerry John Rawlings- Leadership and Legacy: A Pan-African Perspective (Springer, 2022).

Jeffrey Haynes is Emeritus Professor of Politics, London Metropolitan University, UK. He is the author of Revolution and Democracy in Ghana: The Politics of Jerry John Rawlings (Routledge, 2023). 

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