Fitch Solutions: Ghana’s economic woes not solely due to Covid-19 and Russia-Ukraine war
In a recent Sub Saharan Africa Macroeconomic Update, Fitch Solutions dismissed the widely held view that Ghana’s economic woes are largely attributable to the Covid-19 pandemic and the Russian/Ukraine war. The research and market information firm argued that Ghana’s debt had already reached alarming levels prior to the external shocks, and that both internal and external factors have contributed to the country’s macroeconomic imbalances.
According to Senior Country Risk Analyst, Mike Kruiniger, “I think the answer is, it’s been aggravated by the Covid-19 pandemic and the war in Ukraine. Those two are not the only cause of Ghana’s woes.” Kruiniger went on to explain that Ghana’s debt servicing costs were rising rapidly even before the pandemic, as the government embarked on large-scale spending projects including the restructuring of the banking sector and the provision of free secondary education to all Ghanaians.
However, Fitch Solutions also identified Ghana’s high borrowing on the international capital market as a significant contributor to the country’s economic problems. Kruiniger noted that “Ghana went back to the international capital market in early 2021, with this seemingly desperate need for cash. Investors flooded the country, which led to the currency selling off, and since then we’ve seen all the problems that Ghana has been facing since early 2022.”
While acknowledging that the Covid-19 pandemic and the Russian/Ukraine war have aggravated Ghana’s economic situation, Fitch Solutions emphasized that they are not the sole causes of the country’s challenges. The firm’s analysis highlights the importance of a holistic approach to understanding Ghana’s economic problems, which takes into account both internal and external factors, as well as the role of international capital markets.
The situation in Ghana underscores the complex and interrelated factors that can impact a country’s economic fortunes. As policymakers grapple with the challenges of debt sustainability, fiscal and monetary policy, and economic growth, they will need to take into account the full range of factors at play. In the case of Ghana, Fitch Solutions’ analysis suggests that addressing the country’s economic problems will require a multi-faceted approach that goes beyond simply addressing the impact of external shocks such as the Covid-19 pandemic and the Russian/Ukraine war.
