By: Kenneth Appiah Bani
Finance Minister, Dr. Cassiel Ato Forson, has sounded a cautionary note on the escalating borrowing costs faced by African economies, including Ghana, as a result of elevated risk premiums imposed on African debt.
Speaking on the issue, Dr. Forson emphasized that the growing perception of Africa as a high-risk region for investment has translated into prohibitive interest rates on the international capital market. He warned that this development is not only deepening the debt burden of African nations but also threatening their ability to finance critical development projects.
“The elevated risk premiums attached to African debt instruments have made borrowing increasingly expensive. This trend undermines our fiscal stability and hampers efforts to channel resources into vital areas such as infrastructure, education, and healthcare,” the Finance Minister stated.
He stressed the need to rethink the global financial architecture, calling for a fairer evaluation of African economies by international creditors. According to him, the one-size-fits-all approach often unfairly penalizes African countries, even those implementing sound economic reforms.
Dr. Forson further remarked:
“I think the time has come for us to also pay attention to what constitutes the debt service as a percentage to revenue. This is largely because we are borrowing too expensively. Why should African countries borrow so expensive as compared to its peers in other parts of the world?
Why should the risk premium for African countries be so different from Europe, America and other parts of the world?”
He added: “And because we are borrowing so expensively we have little debt but the debt servicing cost is so expensive.”
The Finance Minister made these remarks in Accra after receiving a petition from the African Regional Organization of the International Trade Union Confederation (ITUC–Africa) in collaboration with the Trade Union Congress (TUC) Ghana, which is advocating for the total cancellation of Africa’s debt.
At the same time, he urged African governments to demonstrate greater accountability and transparency in the management of public debt.
“For me the use of debt is also very important. If we use our debt well, we should be able to pay these debts and because sometimes we also don’t properly use the debt that we accumulate,” he cautioned.
He further stressed: “We can’t forever be asking for debt-forgiveness if within us when we get this debt, we misuse it. So it is also important that TUC put pressure on governments to be transparent in accounting for its debts and to use this debt well.”
Observers say Dr. Forson’s warning highlights the broader challenges confronting African economies, many of which are grappling with debt sustainability amid global economic uncertainties, fluctuating commodity prices, and tightening financing conditions.
