Economic crisis: Check out shocking reports about Ghana regarding current economyt shocking report about Ghana regarding current economy

Although the bond market has recently experienced a modest uptick, distressed debt in emerging nations continues to be a severe weakness in the world economy that is gearing up for a downturn.

$215 billion in debt due in the next two years must be refinanced by governments of emerging nations.

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But many are no longer able to borrow.

Asset managers including Allianz SE, BlackRock Inc., and Fidelity Investments are among those with the greatest exposure to distressed debt.

“We expect the borrowing conditions for emerging markets to stay difficult and rates to remain high,” said Guillermo Osses, head of emerging-market debt strategies at hedge fund manager Man GLG, which has run the best-performing EM fund this year.

“Around 15 countries have sovereign bonds trading at distressed levels, and there is no option for them to refinance the current level of debts at these rates. They will have to either go to the IMF, devalue their currencies or restructure the debt.”

Ghana benefited from a debt-relief project launched by the IMF and World Bank in the early 2000s, which erased nearly $4 billion of its debt stock by 2006. This initiative also helped dozens of other poor nations.

According to Bright Simons, an economist at the Accra-based think tank Imani Centre for Policy and Education, the transition from predominately concessional funding to predominately commercial borrowing after 2007 was momentous for Ghana.

“This new source of funding was completely different from what we’d experienced in the past — this money was going directly to the budget like a steroid injection straight into the bloodstream,” said Simons.

The cathedral “is the ideal illustration of the spending spree: Ghana behaving like a fantastically affluent sultanate in the Gulf rather than a developing country just achieving frontier market status.”

Ghana spent years promoting itself as a business-friendly nation that promised political stability and a venue for foreign investors to achieve outsized returns that they would easily be able to repatriate in order to remove the “shame of debt.”

In 2019, foreign direct investment surged to around $4 billion, consistently outpacing Nigeria’s neighbor, whose economy is more than five times larger.

However, as Simons points out, Ghana is “particularly sensitive to global fluctuations in sentiment” due to its FDI-stock-to-GDP ratio of around 80%, which is far higher than the continental norm of about 25%.

President Nana Akufo-Addo has experienced domestic issues as a result of these adjustments. Around the nation, protests and store closings have been sparked by the rising cost of living.

In addition, the majority of the government’s own party has demanded the resignation of finance minister Ken Ofori-Atta, who is under fire from lawmakers for his handling of the economy and expenditure on the cathedral.

Ghana’s economic growth was influenced by the start of commercial oil production in 2010, but systemic challenges are now more obvious. Crude output levels have never matched government predictions; today, they stand at fewer than 200,000 barrels per day, or less than half of prior estimates, and recent years have seen a slowdown in investment in the sector.

The administration and opposition generally hold each other responsible for the country’s current financial crisis, along with the effects of the epidemic and the war in Ukraine on the economy. The former administration issued a number of lucrative take-or-pay electricity contracts between 2013 and 2015, according to certain current ministers.

The agreements, which were made to address a short-term electricity crisis, led to the construction of private production facilities with a capacity of 4,600 megawatts, nearly twice the level of the country’s peak demand of 2,700 megawatts. As a result, the nation now pays $500 million annually for electricity that is not used and cannot be stored.

By 2023, debt to fuel providers and power firms may total $12.5 billion.