National Democratic Congress (NDC) and New Patriotic Party (NPP) are the two largest political parties in Ghana, and there has been a long-standing public debate about who has borrowed more.
In the Fourth Republic, which began in 1993, the National Democratic Congress (NDC) and the New Patriotic Party (NPP) have alternated eight-year mandates in power. During their respective terms in office, both governments borrowed money to fund various initiatives. The administration of President J. A. Kufuor was the first to investigate financing alternatives beyond bilateral and multilateral loans by entering the Eurobond market.
As part of the Highly Indebted Poor Countries (HIPC) Initiative, Kufuor's government benefited from debt forgiveness. The country received $3.7 billion in debt relief from the International Monetary Fund (IMF) and the World Bank, freeing up funds that would have gone toward interest payments. Consequently, it could account for the government borrowing less.
Stephen Ntim, the leader of the New Patriotic Party, has recently criticized the National Democratic Congress for misrepresenting Ghana's debt situation by using nominal figures. Using nominal figures, according to Mr. Ntim, conceals the NDC's unprecedented rate of debt accumulation during its time in power.
Between 2009 and 2016, he claimed, the country's largest opposition party increased the debt stock by 819 percent, from GHc 9.7 billion to GHc 122 billion. However, he did state that the Akufo-Addo administration was only responsible for a 304% increase in the country's total accumulated debt, which he attributed to costs such as the banking sector cleanup, energy sector debt payment, and Covid-19 debt.
Ahead of the elections in 2020, the National Democratic Congress also accused the Akufo-Addo administration of borrowing more than any other Ghanaian administration in history.
"In 2016, our public debt was 120 billion Ghana cedis, and our debt to GDP ratio was 55.6% (revised economic data). However, what do we see now? As of June 2020, our public debt, which stood at GHS120 billion in December 2016, has escalated to GHS258.8 billion. In addition, our debt-to-GDP ratio, which stood at 55.6% as of December 2016, has increased to 68.3% and is projected by the IMF to reach 76.7% by December of this year, said Sammy Gyamfi, the party's National Communications Officer.
This report from Fact-Check Ghana details how much each government has borrowed over the past decade.
Comparing the chart above, it can be seen that the country's total debt stock doubled between 2011 and 2021, placing Ghana at a high risk for debt distress. This has increased the nation's overall vulnerability to debt.
Under the stewardship of the late John Evans Atta Mills and John Mahama, the country borrowed GHS112, 426,14 billion within eight years (2008-2016).
During his time in office, Mahama was responsible for 86,263,4 billion cedis in debt.
When Nana Akufo-Addo assumed office in 2017, his government enacted the Fiscal Responsibility Act to maintain manageable levels of national debt. However, the Act would have little to no effect, as the government's debt stock continued to rise.
Below is a data visualization of how much each government has contributed to Ghana's debt stock throughout the years:
In five years, the government commanded by Nana Addo has increased the country's debt by over 400 billion cedis. This is twice as much debt as the NDC under John Mahama incurred in nominal terms.
According to Ghana's Ministry of Finance's annual debt management report for 2021, the increase in the debt stock in 2021 was attributable in part to financial sector clean-up costs, energy sector payments, and COVID-19-related expenditures. In addition, the cleanup of the financial sector in 2021 cost the public purse 25 billion Ghanaian cedis.
Due to a mismatch between domestic revenue and expenditures, the nation has struggled to satisfy its debt obligations. In response, the "big three" credit rating agencies – Fitch, Moody's, and Standard & Poor's – downgraded Ghana's creditworthiness to "junk" status. These agencies' scorecards assist investors and other interested parties in evaluating the creditworthiness and ability to repay debt obligations of an entity.
Due to the country's inability to resolve its substantial balance of payments deficit, the Ministry of Finance announced in December 2022 that it would suspend payments on a significant portion of its external debt, effectively declaring a default. The ministry of finance announced that it will be unable to service its Eurobonds, commercial loans, and the vast majority of its bilateral loans. It was described as a "interim emergency measure."
Since then, it has implemented the disputed Domestic Debt Exchange Programme, which concluded in February. As it awaits a $3 billion International Monetary Fund (IMF) bailout, the government is presently negotiating with its external creditors.
Why using only percentages or nominal figures in debt analysis can be deceptive
According to experts, relying solely on percentages or nominal figures when analyzing debt can be deceptive and lead to a misunderstanding of the true level of debt. Because they do not inherently reflect the total amount of debt or the ability to service it, percentages can be deceiving.
Similarly, nominal numbers can be misleading because they do not account for inflation or currency value fluctuations. For example, a country may have a high nominal debt, but if inflation is high, the debt's real value may be lower. Conversely, a country with a low nominal debt may still struggle to service it if its currency loses value.
To avoid being misled by percentages and nominal figures, experts recommend conducting a more thorough debt analysis. This includes analyzing the debt's absolute level, its sustainability, and its serviceability. Debt sustainability is the analysis of a country's capacity to manage its current debt and avoid default, whereas debt serviceability is the analysis of its capacity to meet its debt obligations on time.