Professor of Applied Economics at the Johns Hopkins University-USA, Steve Hanke, has warned that Ghana risks facing a huge debt crisis due to the current economic conditions.
The country which has commenced negotiations with the International Monetary Fund has been experiencing a wave of challenges, including the depreciation of the local currency, rising inflation, revenue generation constraints, among others.
The situation has also resulted in credit downgrades by international rating agencies and non-access to the international capital markets for borrowing since the start of 2022.
Professor Hanke who has been keen on economic issues in Ghana said the local currency has depreciated by over 48 percent since January 2020 by his estimations and thus labelled the Ghana cedi as a junk currency.
“A debt crisis looms on the horizon in #Ghana. Since January 1st, 2020, the #cedi has depreciated over 48%. Thanks to Ghana, my rogue’s gallery of JUNK CURRENCIES just keeps growing,” Professor Hanke wrote on October 24, 2022.
Although the current Akufo-Addo administration has assured that it will address these challenges, the recent depreciation of the cedi against the US dollar, rising inflation and others paint a gloomy picture of the economy.
For now, the government has occasionally blamed external factors such as the ongoing conflict between Russia and Ukraine, and the fallout from the COVID-19 pandemic as reasons for the economic challenges.
Meanwhile, Ghana is targeting $3 billion from the IMF once an agreement can be reached. The support is expected to address the country’s macro-economic stability and among others.
See Prof. Hanke's tweet below:
A debt crisis looms on the horizon in #Ghana. Since January 1st, 2020, the #cedi has depreciated over 48%. Thanks to Ghana, my rogue’s gallery of JUNK CURRENCIES just keeps growing.https://t.co/vRFGcUMYjk
Prof Steve Hanke