Ghana’s economy experienced high, but volatile and unbalanced growth up to 2022 debt crisis.

🇬🇭 Here's What Happened

According to former First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari, the mid-2000 wascharacterised by strong Gross Domestic Product (GDP) growth, averaging 6% annually, driven by cocoa exports, gold production, and later, oil production.

Yet the expansion was also accompanied by rising fiscal deficits and an increasing dependence on external borrowing, setting the stage for future vulnerabilities.

Dr. Opoku-Afari disclosed this in an article titled ““How not to Miss a Crisis: Lessons from Ghana”.

📌 Key Details

He explained that Ghana’s macroeconomic trajectory began to show signs of strain by the early 2010, highlighting that the discovery and exploitation of oil boosted growth, but fiscal discipline weakened, particularly around election cycles.

“Election-driven spending booms produced some growth spurts but were quickly followed by deep fiscal and debt crisis. What is even more surprising is that this high spending often did not result in electoral victories for the ruling government, as the pattern of electoral outcomes shows a weak linkage between election spending and electoral outcomes”.

Dr. Opoku-Afari who is a Non-Resident Fellow of Finance for Development Lab said Ghana’s growth performance hid major vulnerabilities, as it was obtained at the price of high and growing fiscal deficits, and was not diversified, nor based on private investment or high-quality public infrastructure.

Growing Public Deficits Due to Expensive Borrowing Strategies

The former International Monetary Fund (IMF) Mission Chief further stated that Ghana’s debt story typifies the challenges of fiscal management in resource-rich, lower-middle-income countries, with high infrastructure gaps and a growing middle class.

After HIPC relief, he alluded that Ghana started the decade with low gross public debt, but within twenty years, returned to debt distress, demonstrating the cyclical nature of fiscal vulnerability and the difficulty of maintaining debt relief gains. “Fiscal deficits averaged 8.3% between 2010 and 2024, while Ghana’s gross public debt (comprising both domestic and external debt) rose sharply from about 38.9% of GDP in 2010 to 92.7% by 2022, before declining after the 2023–24 debt restructurings”.

📰 Source: Joy Online Ghana