A country in bankruptcy: Ghana announced insolvency in foreign currency, the country will enter a debt settlement procedure
| Gal Rekover, Devar News
Ghana has announced the cessation of debt repayments for a large part of its external debt (debt in foreign currency), and will enter into a debt relief program under the auspices of the International Monetary Fund. In doing so, it joins Zambia, which during 2020 entered a similar procedure.
As of the end of 2021, Ghana’s external debt stood at more than $13 billion to private entities and $3.2 billion to governments, the largest of which is China.
The government in Ghana reached a bailout agreement with the International Monetary Fund last week for a total of 3 billion dollars. In practice, the money will be used mainly to repay the public debt to creditors, while at the same time Ghana will be required to be economically subservient to the IMF. The rest of the debt will be spread in an agreement with the IMF, which will include mandatory economic reforms.
The IMF’s economic reforms are notorious among developing countries. Joseph Stieglitz, a Nobel Prize winning economist, claims that the economic policy imposed by the IMF in its bailout programs is one of the main reasons for the persistence of economic backwardness among developing countries.
According to Stieglitz, the liberalization of capital movements make countries more sensitive to external shocks without significantly increasing the scope of real investments in infrastructure. In addition, the dictated austerity policy stifles their ability to invest in infrastructure and expand the level of local demand. Thus, the countries find it difficult to consolidate productive capacity and enter a cycle of eternal debt.
Last September, more than 100 economists, including Jeffrey Sachs and Jayati Ghosh, called on Zambia’s private creditors, including the holdings giant Blackrock (NYSE: ), which rakes in huge profits through debt holdings and risk-free investments in Africa, to cancel a large part of their debt .
Two years ago, the 20 most powerful economies in the world, the G20, together with the IMF and the World Bank devised a plan to suspend debts for the world’s poorest countries, against the background of the need to increase public debt collection with the outbreak of the Corona epidemic.
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