Dream - Emmanuel Cherry, the executive head of a construction company association in Ghana, sat in a cafe on the edge of Accra Children's Park, near the Ferris wheel and abandoned children's train. He was calculating how much money the Ghanaian government had to pay to thousands of contractors. Before interest, he said, the repayment amounted to 15 billion cedis, or about $1.3 billion or IDR 20 trillion. "Most of the contractors are now at home," said Cherry. Their workers have generally been laid off.

Just like many other countries in West Africa, contractors have to queue to get their money. Training participants complained that their salaries have been delayed for two months. Private electricity producers have warned of massive power outages because the government of Ghana has not paid their debt of U$ 1.58 billion or Rp 24.7 trillion. The Ghanaian government is essentially bankrupt.

After failing to repay billions of dollars in debt to foreign lenders in December last year, the administration of President Nana Akufo-Addo had no choice but to agree to a $3 billion loan from the last resort lender, the International Monetary Fund (IMF). This is the 17th time Ghana has been forced to use this fund since gaining independence in 1957.

The latest crisis is partly caused by the corona virus pandemic, Russia's invasion of Ukraine, and the rising prices of food and fuel. However, the cyclical crises and complicated bailouts have affected dozens of poor and middle-income countries throughout Africa, Latin America, and Asia for decades. This heartless issue will be discussed at the United Nations General Assembly. The debt burden for developing countries - which is now estimated to reach $200 billion or Rp 3,127 trillion - threatens to worsen the economy and hinder progress.

"In Ghana, the IMF is formulating a detailed rescue plan for the country to be able to rise again. The approach: restraining debt and expenditures, increasing income, and protecting the poorest communities – in conjunction with Accra's negotiations with foreign creditors. However, there is still a lingering question for Ghana and other developing countries burdened by debt: why would it be different this time?"

The latest rescue plan has been outlined for Ghana to address major issues, said Tsidi M. Tsikata, a senior researcher at the African Economic Transformation Center in Accra. However, just like previous crises, he said, the crisis continues to repeat itself. The last time Ghana received such funds was in 2015. Within three years, the country was ready to repay its loan and became one of the fastest-growing economies in the world. Ghana has been used as an example for other African countries.

Agricultural production has increased, and the main exports - cocoa, oil, and gold - have also increased. The country has invested in infrastructure and education, and has begun cleaning up the banking industry, which is full of struggling lenders. However, Accra - the capital of Ghana - is once again in great need of the IMF. Loan agreements, and a $600 million repayment in May 2023, have helped stabilize the economy, overcome wild fluctuations in currency rates, and restore some confidence.

"Inflation is still running above 40 percent but has already decreased from its peak of 54 percent in January. Regardless of the IMF blueprint, Tsikata, who previously served as the head of the IMF division for three decades, said that Ghana's chances of not being in the same position in the coming years 'depend on efforts and prayers'."

In Ghana, the government owes a total of U$ 63.3 billion or Rp 989 trillion by the end of 2022 not only to foreign creditors but also to domestic lenders - pension funds, insurance companies, and local banks who believe that the government is a safe investment. The situation is so unusual that the IMF, for the first time, has made repayment of domestic debt a prerequisite for providing bailout funds.

Restructuring in part, which cuts profits and extends due dates, was completed in February. Although debt reduction may be necessary, it will undermine trust in the bank. As for foreign lenders, there are thousands of private, semi-public, and government creditors, including China, who have different loan objectives, arrangements, and regulatory controls. The magnitude and type of debt mean "this crisis is much deeper than the economic difficulties Ghana has faced in the past," said Stéphane Roudet, Head of the IMF Mission to Ghana.

The increasing number of lenders has now become a characteristic of most debts burdening crisis-hit countries worldwide – making it increasingly complex and difficult to resolve. "You can't fit six people in one room," says Joseph E. Stiglitz, Nobel Prize winner and former chief economist at the World Bank. "There are a thousand people in one room."***

Outside Victoria Chrappah's small stall in Makola Market, a line of vendors peddle live chickens, toilet paper rolls, and electronic chargers from giant baskets balanced on their heads. As negotiations for restructuring with foreign lenders continue, households and businesses are doing their best to cope. Chrappah has been selling bathroom mats, shower curtains, and imported household appliances for over 20 years. "Last year was the worst," she said.

Inflation surged, and the value of the cedi currency lost more than half of its value compared to the US dollar – a blow to consumers and businesses when a country imports everything from medicines to cars. The Bank of Ghana raised interest rates to tackle inflation, thus hurting businesses and households that rely on short-term loans or want to invest. Due to rapid currency depreciation, Chrappah explained, "You can sell in the morning at one price, and then you have to consider changing the price the next day."

The purchasing power and savings value have been halved. Doreen Adjetey, product manager of Dalex Swift, a financial company based in Accra, said a bottle of Tylenol to relieve her 19-month-old baby's toothache was worth 50 cedi last year. Now it is 110 cedi. The cost of groceries for a month is over 3,000 cedi compared to 1,000 cedi. Previously, she and her husband had a monthly income of 10,000 cedi, which was worth about $2,000 or Rp 31 million if the exchange rate was 5 cedi to the dollar. At today's exchange rate, it is only $889 or Rp 13.9 million.

Joe Jackson, the director of business operations at Dalex, said the default rate for small and medium-sized businesses is "very high," jumping from 30 percent to 70 percent. The real estate and construction markets have also declined. "There has been a drastic decrease in the number of homes in the first-time buyer segment," said Joseph Aidoo Jr., executive director of Devtraco Limited, a major real estate developer.***

Doris Oduro sits in her small, almost empty shop in Odorkor, on the outskirts of the Ghanaian capital, Accra. This single mother of two feels frustrated. After running her business for 15 years, she is now considering closing her shop because she cannot restock it due to the high cost of living. "I have suffered significant losses," says 38-year-old Oduro. She sells imported goods, including juice, biscuits, soft drinks, toiletries, and sweets, but the economic crisis in Ghana has had a huge impact on her business.

"The price of goods continues to skyrocket, and it affects my capital," he said. "I want to close my store and find something else to do. Everything is difficult for me because I cannot sustain this business and I have to support my family." Ghana, a country once described as a shining star in Africa by the World Bank, had the fastest-growing economy in the world in 2019 after its economic growth doubled."

However, at present, it is no longer the main figure in the economy of West Africa. Despite being a major exporter of cocoa and gold, this country is currently struggling against the worst financial crisis in decades with inflation reaching a record 50.3 percent, the highest in 21 years. Ghana's economic success became the center of attention when the new government under President Nana Akufo-Addo took power in January 2017 and significantly reduced inflation.

Under the previous administration in 2016, the deficit reached 15.4 percent and decreased to 7.9 percent by the end of 2019, remaining in single digits until the pandemic hit in March 2020. Ghana's budget deficit, which amounted to approximately 6.5 percent of the country's gross domestic product (GDP) before the Akufo-Addo government came into power, was reduced to less than 5 percent of GDP in 2019.

“The growth we experienced from around 2017 to 2019 actually came from the oil sector,” said Daniel Anim Amarteye, an economist from the Policy Initiative for Economic Development based in Accra. “We are very happy with the economic growth, but we cannot design strategies to ensure that this growth reflects other sectors of the economy,” he said. “For example, we neglect the agricultural sector, and we cannot make meaningful value-added investments in that sector. The government becomes complacent.”

According to the United Nations Food and Agriculture Organization, agriculture represents 21 percent of Ghana's GDP and contributes over 40 percent of its export income. At the same time, it provides more than 90 percent of the country's food. "For years, the government has failed to invest in improving output in the agricultural sector, which would ultimately lead to economic growth, transformation, and food security. We are a major cocoa-producing country..."

"However, we did not pay attention to the increase in harvest yields that would generate more foreign exchange income to promote economic growth and job opportunities," said Amarteye. Ghanaian traders, who contribute significantly to the economy, mostly buy and sell products that they import from Western and Chinese countries, including household appliances, consumables, cars, and second-hand clothing."

Because of their business nature, there is a strong demand for US dollars to pay for imports. This has caused a continuous depreciation of the local currency, the cedi, which has recently been described as the worst-performing currency in the world market. When inflation soars, price increases make the cost of living for Ghanaians increasingly higher. "The situation is no longer the same," said Francis Anim, a vehicle spare parts importer.

"I used to spend U$ 5 (Rp 78 thousand) a day with my wife and children for meals at the beginning of this year. Now we are spending almost U$ 10 (Rp 156 thousand) for the same amount of food. Why?" "We feel the heat," he said. "Customs duties at the port are very high, so the burden has to be borne by retailers, and in the end it is the consumers who suffer. This has resulted in a high cost of living in Ghana, and the economy is not helping us either."

The following is the translation of the given 'Bahasa' text to 'English' while preserving any html tags: "President acknowledged in his recent speech that the West African country is currently in crisis. He attributed this situation to external shocks - the pandemic and the Russia-Ukraine war. However, analysts say that the government has made certain political and economic decisions that will ultimately expose weaknesses in the system even without these external factors."

For example, to fulfill one of Akufo-Addo's most expensive campaign promises, his government launched a free education program in nine months after he took office. They also provide free meals for students at the elementary and secondary levels. Also in 2017, the ruling New Patriotic Party abolished what it called "disruptive taxes." This includes a 17.5 percent value-added tax on certain financial services, real estate, and imported medicines.

They also reduce import duties on car spare parts, eliminate a special import levy of 1 percent, and a VAT of 17.5 percent on domestic flight tickets. "This has resulted in a significant decrease in government revenue," said Williams Kwasi Peprah, a finance professor from Ghana at Andrews University in Michigan. "To cover the revenue shortfall, the government has resorted to borrowing. This has increased the activity in Ghana's bond market both domestically and internationally, and as a result, the debt exposure to GDP has risen, leading to the current unsustainable debt levels."

The government is the largest employer in Ghana, especially in the fields of education, healthcare, and security. The country spends almost half of its budget on salaries. This year, the company is projected to earn $8.2 billion and use approximately $4.2 billion to pay the salaries of public sector workers.

And Ghana eventually went bankrupt. Throw in the towel. Once again, they reached out to the IMF for a bailout. In history, this is not the first time the country has gone bankrupt. But it is ironic because just four years ago, Ghana was growing rapidly and serving as an example of success for other African countries. Perhaps this is where the tragedy lies. (eha)Source: The New York Times, Al Jazeera, Business Insider Africa, The Conversation