How Ghana went from hero to zero for investors

The onset of commercial crude production helped turn Ghana into one of Africa's hottest investment destinations, but also prompted successive governments to borrow to the hilt. Here's what went wrong for Ghana and why investors are offloading its currency and bonds.

Ghana is learning the hard way why oil can be a blessing and a curse.

The onset of commercial crude production helped turn the West African nation into one of the continent’s hottest investment destinations, but also prompted successive governments to borrow to the hilt .

Skittish investors have offloaded Ghana’s bonds and currency, the cedi, amid mounting concern over its ability to settle its debts.

The tumbling exchange rate has led to a surge in prices of basic necessities, from milk to bus fares, and prompted Ghana's central bank to sharply increase interest rates.

With the economy on its knees, Ghana President Nana Akufo-Addo’s administration has appealed to the International Monetary Fund for an assistance package of as much as $3 billion.

Ghana has been a bastion of stability in a region plagued by civil unrest and coups. It is the world’s second-biggest grower of cocoa and Africa’s No. 2 producer of gold.

Ghana began exporting oil in late 2010. The following year, GDP leaped by almost 14%. The economy has expanded every year since then, with the government’s embrace of a free-market system helping to lure foreign capital and financing.

The government abandoned fiscal discipline and opened the spending taps in anticipation of an oil windfall. But the revenue it earned was insufficient to cover a succession of expensive flagship programs and the budget deficit soared.

In 2021, Ghana's government spent $1 billion on refinancing loans taken out by indebted private power producers. Covid-19 dealt a further blow to the state’s already stretched finances http://trib.al/TLMBd49.

S&P Global Ratings and Fitch recently cut the nation’s credit rating, citing the government’s elevated financing needs and limited access to external financing.