The growing debt stock and economic uncertainties on African youth livelihood

By Mary Alorh

Earlier this year, we Ghanaians were informed of the ‘good news’ that the IMF had released the second tranche of US$600 million as part of the 36-month US$3 billion facility for the Ghanaian government.

This facility is intended to assist the Ghanaian government in restoring microeconomic measures to combat inflation and the escalating cedi to dollar depreciation that has affected the country since 2022. Currently, Ghana’s debt to GDP ratio is 86 percent and as of February 2024, the country’s debt stood at GH¢658.6 billion (US$43 billion).

Ghana is not alone in this situation; African countries such as Zambia are also experiencing debt distress, which is a significant concern for the economies of Africa. The top 5 countries in Africa account for 40 percent of IMF borrowing.

The structure of African economies means that global events have an impact on the economies of Africa. In 2008, the financial crisis had a significant impact on African economies, eroding the gains made in 2007, and venture capitalist financial flows began to diminish during the recession.

African economies during and after COVID-19 have experienced a sharp decline in growth, exacerbated by wars and terrorist insurgencies. This has led to increasing debt stocks in most countries. Ghana, since 2022, has been engaging in debt restructuring with the introduction of a domestic debt exchange program, which faced stiff opposition, especially from the retired older citizens of the country whose long-term investments were affected.

The major effect of these growing debts is the government diverting needed resources to provide social cushioning in these increasingly harsh economic realities to loan repayment.

This debt accumulation has led to politicians introducing various forms of taxes in the name of raising revenues to mitigate the situation.

The government’s taxation has created an unfriendly business environment in some of these countries, leading to the exit of many international businesses operating in these spaces that create employment as well as livelihoods. Ghana and Nigeria are examples where companies are folding up and leaving these countries.

This has created a sense of despair among young Africans, knowing very well that their future chances of making a livelihood seem bleak.

The consequences of this situation are the frequent protests by young Africans against their governments, demanding friendly measures to navigate these hostile economic conditions.

In conclusion, the African youth and the vulnerable groups are seeking basic survival in this time of economic hardship. Hence, the growing debt stock presents a distressing future for the vulnerable groups on the continent. It is therefore imperative for the various governments to provide social interventions to mitigate these hardships faced by the poor and vulnerable groups.

Mary Alorh is Director of Administration at DefSEC Analytics Africa Ltd., and is an expert in Gender, Youth, and Peace & Security initiatives in West Africa.