The World Bank’s latest April 2023 Africa Pulse Report has highlighted the dire state of Ghana’s debt crisis.

Contrary to the government’s claims of reaching an agreement with its creditors, the report notes that Ghana is yet to make progress with the G20 Common Framework Debt Treatment with its bilateral creditors, including the Paris Club – to pave way for an International Monetary Fund-support programme.

The failure to make headway with the debt treatment programme is a cause for concern for the West African nation – which has been grappling with a severe debt burden that has been exacerbated by the COVID-19 pandemic.

“Ghana requested a Common Framework debt treatment in early 2023; hence, progress has yet to be made. In conjunction with the Common Framework engagement, Ghana conducted a voluntary domestic debt exchange programme. Other countries engaged with private creditors, and bilateral donors engaged in external restructuring efforts through bilateral engagements (Malawi)”.
”Yet, these efforts cannot replace a comprehensive and well-coordinated solution for countries in debt distress. High liquidity and solvency pressures may push more countries into an unsustainable situation that requires a comprehensive restructuring of their obligations.”
World Bank Report

The World Bank report warned that Ghana’s debt levels and vulnerabilities remain high and could worsen, especially for countries that have lost access to the credit market and are in or at risk of debt distress.

If not addressed, it stressed that debt dynamics could escalate into a full-blown crisis, setting countries (Ghana) even further back.

According to World Bank, in the absence of a comprehensive and well-coordinated solution for countries in debt distress, high liquidity and solvency pressures may push more countries into an unsustainable situation that requires a restructuring of their obligations.

The report suggests that the international community needs to find more adequate ways to speed up debt treatments, strengthen current resolution mechanisms and set additional instruments in motion to address potential debt crises

World Bank Suggests Policy Recommendations For African Countries

The failure to make progress with the G20 Common Framework Debt Treatment is a worrying sign for Ghana, which has been struggling with a ballooning debt burden in recent years.

The report underscored the urgent need for African economies, including Ghana, to increasingly rely on their own policy reforms and domestic space for action in three critical areas.

“First, restoring macroeconomic stability is essential for growth. Raising interest rates and avoiding policy conflicts that reduce the effectiveness of monetary transmission (say, fiscal dominance, and foreign exchange distortions) are crucial to reduce inflation to target levels.
“Second, structural reforms that foster private investment should be at the top of the pro-growth policy agenda of countries in the region. A premium should be put on policy measures that boost long-term competitiveness – including actions to improve market contestability and promote a sound regulatory framework. Third, African policy makers need to seize the opportunities that are available to them during the low carbon transition.”
World Bank