Ghana is going through the most critical time in its political history. The nation is struggling to recover from a collapsed economy, rising unemployment, the high drop in both local and foreign investments, and an inability to address the worst widespread corruption that has ever occurred in a West African democracy. The country continues to be the most indebted nation in Africa, according to the International Monetary Fund, with a growth of 35.55% during the studied period.
No government has received more financial assistance from the World Bank than Akufo Addo's government, yet, nobody knows where the money ends, therefore; the lack of job creation and ongoing borrowing have gotten worse, having a disastrous effect on both the economy and the lives of the average person. Nothing is improving despite the NPP government's introduction of additional levies, such as the COVID tax; instead, everything is collapsing.
Even though taxes and other mandatory payments made by citizens make up the majority of the money the state receives to fund its operations, but as a result, the amount of payments to the state budget has significantly decreased to tackle the economic problems that have resulted in hardships and high commodity prices of food and basic commodities. The economic situation of the country, when the needs exceed the means to meet them, is usually called a budget deficit.
When Akufo Addo was being criticized for taking on too much loan or borrowing, forewarning him of the potential ramifications for the nation, he responded by telling his critics that "even the United States of America borrows.” While it is true that the United States of America can borrow money, they prudently use it to grow the nation and generate jobs, while in Ghana; the funds are embezzled into private accounts, leaving the country with a lack of job creation.
Ghana, being the highest borrower, is unable to raise the income side of its budget since a government loan is a credit relationship in which the state is the borrower and the creditors are different people or legal entities. Moreover, since the nation must always pay interest on the loan, higher production costs are a requirement for this kind of financing. The sad part is Ghana is repaying the International Monetary Fund loan that did not help the country's citizens.
Ghana is not impoverished, as the British Ambassador to Ghana, Harriet Thompson, had stated, but foreign aid and other cash are not going in the right direction. One of the reasons Ghana's economic status and problems have not changed since the International Monetary Fund issued the country's first tranche of 600 million dollars out of a total of 3 billion dollars, is that the corrupt NPP administration didn’t use it to solve the critical issues, yet; the government is waiting for the second tranche.
Since the Ghanaian government is paying interest, any discussion of the state loan’s potential for economic growth must take into account the fact that it does not always benefit them. The rise in tax payments also slows the expansion of business activity, which lowers the country's rate of economic growth. Ghanaians must understand the reason business activities at the ports have collapsed, while every Ghanaian is responsible for paying taxes or repaying the debt that the corrupt government has incurred.
Interest rates on paying down the debt abyss can go up, while the proper management of state debt is contingent upon currency changes in international markets, amid public debt comes in two conditions: short-term and long-term. In the long run, addressing the budget gap may cause production to stall and result in multiple cost increases.