Economist and Finance professor at the University of Ghana Business School, and Professor Godfred Bokpin, has expressed deep concerns over Ghana’s growing debt crisis following President John Mahama’s State of the Nation Address (SONA) and Proposed a recovery pathway to Ghana’s Debt crisis.

In an insightful discussion, he dissected the nation’s economic challenges, particularly highlighting the alarming debt levels and their impact on macroeconomic stability.

Prof. Bokpin began by framing Ghana’s economic difficulties as a debt-induced macroeconomic instability, emphasizing that the situation goes beyond just the government’s fiscal position.

He explained that when the public balance sheet is impaired, it has far-reaching consequences beyond the public sector, affecting the financial system and private sector confidence.

“For the first time in our history, we’ve had to go through a very painful domestic debt exchange that did not even spare pensioners. That did not even spare pension funds.”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

He reminded listeners that Ghana had undergone debt restructuring before, citing instances in 1966, 1970, and 1972, as well as the HIPC initiative.

“We have restructured our debts before, but all that we had to do was pass on the haircut to foreign investors or external debt. This time around, doing that was not sufficient. We had to restructure the domestic debt.”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

The Debt Sustainability Crisis

Prof. Bokpin highlighted the alarming debt-to-GDP ratio, which had far exceeded acceptable limits.

“One key macroeconomic indicator that the market values is debt sustainability. Either you measure that in terms of the present value of debt to GDP ratio, and we were not supposed to do in excess of 55%.”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

However, in 2022, an IMF and World Bank debt sustainability analysis revealed that Ghana’s debt-to-GDP ratio had ballooned to 109%, nearly double the accepted threshold.

Furthermore, he emphasized that Ghana’s external debt-to-revenue ratio was significantly higher than recommended.

“The external debt-to-revenue ratio, which should not be more than 18%, we are doing more than 22%.”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

Despite restructuring efforts, he warned that debt sustainability has not yet been restored, and Ghana remains locked out of its own domestic credit market.

Prof. Bokpin pointed out that similar concerns about debt had been raised by the New Patriotic Party (NPP) when they took over power in 2017. He urged listeners to compare line by line President Mahama’s recent address with former President Akufo-Addo’s 2017 SONA.

He noted that while Ghana’s inflation rate in 2017 was 15.4%, the NPP had painted a grim picture of the economy at that time. Comparing that period to the current state of the economy, he bemoaned that the economic challenges had only deepened.

“[With] the huge public debt, even though we’ve gone through debt restructuring—both domestic and external—if you look at the projection in terms of our debt servicing in the next four years or even the next ten years, you can see that it leaves very little space for development spending.”
“The President said, ‘I will fix it.’ And for me, that gives hope. That is like taking personal responsibility.”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

State-Owned Enterprises and the Energy Sector Crisis

Prof. Bokpin turned his attention to ECG’s Inefficiencies and the role of state-owned enterprises (SOEs) in Ghana’s fiscal challenges. He said; ‘’Except for irresponsible mining, the biggest threat to our fiscal sustainability is actually the energy sector.”

Despite multiple interventions, including the Energy Sector Levy Act (ESLA), he lamented that these measures have only burdened consumers with more taxes rather than solving the problem. Additionally, he called attention to COCOBOD’s inefficiencies, which continue to drag the economy down.

“Investors are concerned that state-owned enterprises, by their own cash flow generation capacity and how they manage it, will not be able to resolve their debt burdens unless taxpayers step in with extra injections.”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

In a passionate critique, Prof. Bokpin questioned why Ghana, despite boasting of an educated population with alumni from world-class institutions, continues to grapple with so many economic crisis.

“Come to think about it, that as a country, 68 years after independence or so, we cannot demonstrate to the people of Ghana that this is how we have brought to bear all the knowledge and experience in managing our own affairs.”
“People have gone to Harvard, people have gone to Yale, people have gone to Oxford. Where are our values?”
Professor Godfred Bokpin, Professor of Finance, University of Ghana Business School

Prof. Godfred Bokpin’s analysis painted a sobering picture of Ghana’s economic challenges. He stressed that the country is in the grip of a severe debt crisis, with debt-to-GDP ratios at unsustainable levels, fiscal space for development shrinking, and state-owned enterprises dragging down economic performance.

However, he urged a fundamental rethink of economic management, calling on Ghana’s intellectuals and policymakers to demonstrate true leadership in guiding the nation out of its crisis.