Data from the Apex Bank in Ghana reveals a concerning trend in the nation's public debt following the agreement on a $3 billion Extended Credit Facility from the IMF. According to the Bank of Ghana's March 2024 Summary of Economic and Financial data, debt accumulated since the start of the IMF program in May 2023 has reached GHS 30.5 billion, bringing the total public debt stock to a historic high of GHS 610 billion. This increase is attributed to the depreciation of the cedi, although the debt has decreased in dollar terms by about USD 4 million.
The decision to seek IMF assistance stemmed from a significant economic crisis in 2022, exacerbated by internal vulnerabilities and external shocks, including the COVID-19 pandemic. Loose fiscal policies, expensive borrowing, energy and financial sector challenges, and global events led to tightening financial conditions, high debt levels, inflation, currency depreciation, and depleted reserves. To bridge funding gaps, the government turned to domestic borrowing, but high-interest rates hindered private sector growth, leading to a macro-financial crisis.
While conditions improved after the IMF deal, recent indicators pose challenges, including increased exchange rate volatility. The cedi's depreciation, losing nearly 9% in value in the first quarter of 2024, has been exacerbated by a decrease in trade balance, driven by reduced cocoa revenue and delays in cocoa syndicated loans. Additionally, US monetary tightening and forex crises in Nigeria contribute to the cedi's depreciation.
Without intervention, continuous currency depreciation could escalate import costs, leading to inflation and further debt accumulation, posing economic challenges. Addressing these issues is imperative to safeguard the progress made under the IMF program and ensure economic stability.