HOW NOT TO MISS A CRISIS: LESSONS FROM GHANA

Between 2010 and 2019, Ghana was widely regarded as one of Africa's strongest economic performers, with sustained growth, a successfully completed IMF programme, a modernised public financial management framework anchored by fiscal rules, and debt sustainability analyses that gave no signal of an imminent crisis. Yet within a few years, the country had suspended payments on most of its external debt and entered a comprehensive restructuring. The 2022 crisis was not a sudden accident, rather the culmination of vulnerabilities that had accumulated over more than a decade, exposing weaknesses that had been building beneath Ghana's otherwise strong headline performance.

This paper reconstructs Ghana's post-HIPC debt trajectory and asks a central question: how did a country with relatively strong growth, repeated IMF surveillance, and established fiscal and debt-management frameworks accumulate debt to the point of distress again? It examines whether the 2022 crisis resulted principally from unforeseen shocks  (COVID-19, the war in Ukraine, sharp currency depreciation and the loss of market access), or from warning signs that were hiding in plain sight.

Through this lens, four core findings emerge.

• First, strong growth masked persistent structural weaknesses. Commodity exports and social investment drove growth between 2010 and 2019, but concealed a steady decline in total factor productivity, a narrow export base, and limited diversification. Ghana accumulated debt faster than it built the productive and revenue-generating capacity needed to service it.
• Second, headline public debt understated true fiscal exposure. Liabilities accumulated in the energy, cocoa and financial sectors, alongside arrears, contingent obligations and other quasi-fiscal exposures – the "hidden debt" that amplified the eventual crisis.
• Third, the shift toward domestic borrowing transformed rather than eliminated risk. Initially seen as a risk-mitigation strategy, it raised the interest burden, crowded out private credit, and tightened the sovereign–bank nexus. Heavy non-resident participation in cedi-denominated securities transmitted shifts in investor sentiment straight into domestic financing and exchange-rate pressures.
• Fourth, domestic institutions and external surveillance fell short. Fiscal rules and expenditure controls existed but were weakly enforced. IMF surveillance and DSAs repeatedly flagged rising vulnerabilities, yet rollover and liquidity risks, domestic debt–financial sector feedback loops, foreign-exchange exposure and contingent liabilities were not sufficiently internalised, while optimistic baseline assumptions understated how rapidly these risks could crystallise.

The paper concludes with recommendations to strengthen public financial management and surveillance in Ghana: comprehensive balance-sheet reporting, regular stress-testing of domestic debt, and formal roles for non-governmental actors in fiscal oversight. These lessons extend well beyond Ghana to other developing economies seeking to build resilience and prevent crisis.