Ghana is facing a severe debt crisis, with the government essentially bankrupt and relying on the International Monetary Fund (IMF) for its 17th financial rescue since gaining independence in 1957. The country's debt load, estimated to be over $200 billion, threatens its economy and progress in education, healthcare, and income growth. The IMF has outlined a rescue plan for Ghana, but previous plans have not prevented recurring crises. The complex and extensive debt burden, including both foreign and domestic lenders, makes resolving the crisis challenging. Ghana's economy, heavily reliant on exports of raw materials, lacks diversification and sustainable growth. The need for financing and the flow of international capital contribute to the debt trap, with many countries lacking the savings and access to low-cost loans needed for development. Solutions proposed include debt forgiveness, increased low-cost lending from multilateral banks, and better tracking and auditing of loans.
Pakistan's finance minister announced that China has rolled over a $2.4 billion loan for the country for two years, providing relief for Pakistan's economic crisis. The loan extension will help boost Pakistan's foreign exchange reserves, which were only enough to cover two months of imports. China's support has been crucial in helping Pakistan avoid default, although concerns about the growing Chinese loans being a debt trap have been raised. This development comes after the International Monetary Fund deposited a $1.2 billion bailout installment, and Pakistan's foreign exchange reserves have increased to $14 billion. Prime Minister Shehbaz Sharif stated that Pakistan no longer faces the risk of default, and he attributed the economic downturn to alleged corruption under former Prime Minister Imran Khan.
Developing countries, including Pakistan, Sri Lanka, and Kenya, are struggling to fund their welfare schemes, education, and healthcare systems due to their high foreign debt to China. Most of their tax revenue is going towards paying back foreign debt, and even paying the interest on the loans is costing the nations dear as most of them have nearly exhausted their foreign reserves. Experts predict that unless China begins to soften its stance, there could be a wave of defaults and political upheavals.
China has called US Treasury Secretary Janet Yellen's remarks on Beijing's lending activities "irresponsible" and "unreasonable." Yellen had expressed concern over China's lending to developing countries, leaving them "trapped in debt." China has lent hundreds of billions of dollars to build infrastructure in developing countries, but lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends. China says it has always followed international rules and carried out investment and financing cooperation with developing countries with openness and transparency.
