The nation’s enviable social and political stability, in comparison to its peers, has been a source of pride and a magnet for investments. However, it has had an indirect adverse effect on the fortunes of the economy.

This is according to Managing Partner at portfolio investment and advisory firm, Access View Africa, Nkechi Akunyili, who believes that the relative tranquility the country which has enjoyed has led to a glut of foreign investor confidence, especially on the foreign debt market, and is directly correlated with the nation’s ballooning debt stock, which is currently hovering around 80% of GDP.

She made this known whilst sharing her thoughts on the nation’s post-pandemic recovery at a webinar organized by currency trading solution, AZA Finance on the theme, ‘Ghana in Recovery: Outlook for Growth, AfCFTA and Cedi’.

“When we talk about Ghana we can’t talk about recovery without looking at the strengths that we have —prior to the pandemic, we were one of the fastest growing economies and that was actually as a result of a confidence the market had in Ghana.

Whenever we have a debt issuance, there is huge investor patronage to it; this is largely due to the political stability not just the security. These are the things that we have actually been able to ride on, but what this has done for us is that our debt ratio has really ballooned as a result,” she explained.

Ghana’s debt situation

This is coming at a time when there is increasing public concern over the nation’s nominal outstanding public debt stock, which stood at an all-time high of GH¢291.6 billion in December 2020, or 76% of GDP, according to the Bank of Ghana (BoG).

The prevailing trend – which the International Monetary Fund (IMF) predicts will lead to a debt-to-GDP ratio of 83.2% in 2022, and then to 84.8%, 86.0% and 86.6% in 2023, 2024 and 2025 respectively – has led to the Bretton Woods Institution to deem Ghana as being at a high risk of debt distress.

This is further compounded by the fraction of government revenue required to service these facilities as interest costs currently stand just shy of 50% of government revenue. Whilst conceding that national borrowing is not always rash, and is in many instances, is the prudent route to take, Ms. Akunyili expressed concerns over the nation’s level of competitiveness post-pandemic, if it continues to remain highly indebted.

“To be honest, debt is not the problem. However, what we are financing with our debt is a lot of recurrent expenditure and refinancing costs and interest payments, that’s where the problem is. We might pat ourselves on the back over interventions such the One District, One Factory (1D1F) and go on and on about it but we need to ask ourselves, how much of this borrowing has gone into that sector?” she quizzed.

AfCFTA

She consequently advocated for a focus on local value-addition as well as an increased net export as measures required in addressing the trend and set the nation on the right recovery path post-pandemic. She added that this is especially critical in light of the opportunities presented by the African Continental Free Trade Area (AfCFTA).

“We are too import-dependent and what we actually export tends to be our primary raw materials just like we have in most African countries. It is not really peculiar to Ghana. But if we are talking about recovery we need to rewrite this by financing real growth. We should not be exporting raw materials but adding value to them and creating industries if we are to get it right as we go into recovery,” she said.