Development economist Dr. George Domfeh says Ghana’s recent debt reduction and the relative stability of the cedi are not the results of extraordinary the John Dramani Mahama government’s performance but rather the outcome of the country’s ongoing debt restructuring programme.
Dr. Domfeh told Kwasi Afriyie on Metro TV’s Business Edge , that it is “factually incorrect” to claim that Ghana’s debt has fallen because of new economic management strategies introduced by the current government.
“I am surprised to hear that the debt has gone down because this new government came to do something spectacular. That is not factual. It is factually incorrect,” he said.
According to him, Ghana’s public debt history must be viewed in context, tracing back to the days of former President J.J. Rawlings, when the country’s debt-to-GDP ratio reached 182 percent.
He explained that Ghana entered the Highly Indebted Poor Countries (HIPC) programme under former President John Kufuor to reduce the burden, which brought the ratio down to 26 percent by 2006.
Dr. Domfeh said debt levels began to climb again after 2014, reaching 71 percent of GDP and pushing Ghana back into crisis.
This, he said, led to the 2015 IMF extended credit facility programme that helped stabilise the economy and spur growth between 2017 and 2019.
“You cannot talk about the progress Ghana made between 2017 and 2019 without referencing the IMF credit facility we signed in 2015,” he noted.
He said by 2019, Ghana’s GDP growth stood at 6.5 percent, with inflation dropping to 7.9 percent – indicators of a fairly stable economy. However, the COVID-19 pandemic disrupted this progress.
“When COVID came, government revenue dropped from 66 billion to 55 billion, while expenditure ballooned to over 100 billion. Government had to borrow heavily, and the debt-to-GDP ratio jumped from 62.5 to 76 percent,” Dr. Domfeh explained.
He said that before the pandemic, the Fiscal Responsibility Act of 2018 had helped keep Ghana’s deficit below 5 percent, but that changed when the health crisis hit.
Dr. Domfeh also pointed out that the cedi remained largely stable for five years between 2017 and 2021, moving only from GH¢4.20 to GH¢6.20 to the dollar – one of the best records for the local currency.
“For 61 good months, dollar to cedi was not a problem. It stagnated,” he said.
He attributed the sharp depreciation that followed in 2022 partly to the Russia-Ukraine war, which triggered global economic instability despite Ghana having reserves of $9.9 billion at the time.
The economist said Ghana’s total public debt stood at about $60 billion at the end of 2021 but has since declined to $49.3 billion after the government’s debt restructuring exercise.
“Let’s be very careful. Yes, the debt in cedi terms has subsided, that is true, but it is the debt restructuring that has brought us to where we are,” Dr. Domfeh said.
He urged that discussions about the cedi’s performance or the country’s debt management should be grounded in economic reality, not political spin.
“We need not do politics over this. We must learn from it and move forward as a country,” he added.
