Ken Ofori-Atta, Ghana’s finance minister, has said that the country is in danger of going bankrupt.
This was detailed in a report by the Parliament’s Finance Committee as one of the justifications for allowing the government’s usage of USD 750 million for the 2022 budget.
Chairman of the Finance Committee of Parliament, Kwaku Kwarteng, in the report stated that “the Mr Ofori-Atta had explained to the committee that the approval of the facility is urgently needed to avoid the country going bankrupt and help the country meet its debt obligations.”
Providing further clarity, he said Mr. Ofori-Atta had indicated that Ghana has over the past recent years accessed financing from the International capital market and the domestic bond market to support the implementation of the budget.
However, the International Capital Market is unavailable this year as a result of the downgrade of the country’s credit rating by the International capital agencies.
He also mentioned that the government’s intention to raise funds from the domestic bond market did not also yield the desired result.
Ghana’s economy is facing external shocks. The government has attributed this development to the COVID-19 pandemic and the Russian-Ukraine.
The public debt to GDP ratio increased from 54.2% in 2017 to 61.2% in 2019 to 74.4% in 2020 and increased further to 76.6% at the end of 2021.
Inflation is also on the high. As of June 2022, the Ghana Statistical Service revealed that Ghana’s inflation rate stood at 29.8%. Currently, the Bank of Ghana reports an exchange rate depreciation of 24.5%.
As a result of these and other factors, the government is seeking an IMF bailout to cushion the economy from deteriorating further.
In spite of the government’s initial reluctance to seek support from the fund, President Akufo-Addo has now assured Ghanaians that his government will negotiate a good deal with the International Monetary Fund.
