Ghana's economy experienced high but volatile growth from the mid-2000s, ultimately leading to the 2022 debt crisis. This expansion was characterized by strong Gross Domestic Product (GDP) growth, averaging 6% annually, but was undermined by rising fiscal deficits and increasing dependence on external borrowing.
Dr. Maxwell Opoku-Afari, former First Deputy Governor of the Bank of Ghana, explained that this growth, initially driven by cocoa, gold, and later oil, created significant vulnerabilities. Fiscal discipline weakened, especially around election cycles, where spending surges often did not translate into electoral victories. This pattern of high spending without sustained positive outcomes contributed to recurring fiscal and debt crises.
This economic trajectory fits into Ghana's broader narrative of managing resource wealth while facing persistent fiscal challenges. Despite receiving debt relief under the Highly Indebted Poor Countries (HIPC) initiative, Ghana returned to debt distress within two decades. This demonstrates the cyclical nature of fiscal vulnerability and the difficulty in maintaining gains from debt restructuring. The nation's growth was not diversified, nor was it based on robust private investment or high-quality public infrastructure, hiding underlying weaknesses.
Dr. Opoku-Afari, a Non-Resident Fellow of Finance for Development Lab, disclosed these insights in his article titled “How not to Miss a Crisis: Lessons from Ghana.” He stated that Ghana's debt story reflects the fiscal management challenges common in resource-rich, lower-middle-income countries. These countries often have significant infrastructure gaps and a growing middle class, which can pressure public finances.
The implications of this unbalanced growth are profound for Ghana's economic future. Fiscal deficits averaged 8.3% between 2010 and 2024, while gross public debt surged from 38.9% of GDP in 2010 to 92.7% by 2022. Key turning points included increased Eurobond issuance from 2007, accelerating after 2013, and significant fiscal slippage. The depreciation of the Ghanaian Cedi in 2022 alone added GHS 93.9 billion to the external debt stock, equivalent to 0.2% of GDP.
By 2018–2020, debt service consumed over 45% of government revenues, signaling an unsustainable debt path. Interest payments alone absorbed about 29% of total public expenditure between 2018 and 2022. When combined with employee compensation, these rigid obligations consumed nearly 60% of the national budget. This left minimal fiscal space for crucial investments in education, health, and other essential public services. The national budget became increasingly constrained, unable to function effectively as a tool for development and improving livelihoods. This situation created a foundation for a continuous cycle of borrowing to cover annual budgetary financing gaps, a critical issue for policymakers and markets to watch.