Bankruptcy: A Rising Concern for Nations Across the Globe
The Bankruptcy Crisis in Ghana
The West African nation of Ghana has recently been declared bankrupt, following its failure to repay the debts on time. The situation left the government with no choice but to resort to a loan of $3 billion from the International Monetary Fund (IMF). The borrowed funds are intended to help manage the nation’s financial crisis, which has led to layoffs by many contractors, exacerbating the country’s unemployment issue.
Emmanuel Cherry, the CEO of a Ghanaian construction company association, revealed that the government’s repayments to contractors amount to 15 billion cedis, approximately $1.3 billion, before interest. The government also owes independent electricity producers about $1.58 billion, putting the country at risk of widespread power outages.
This is not the first time Ghana has sought help from the IMF. Since gaining independence in 1957, the country has requested assistance from the IMF 17 times. The recent crisis has been attributed, in part, to the coronavirus pandemic, Russia’s invasion of Ukraine, and soaring food and fuel prices.
The Sri Lankan Crisis: A Similar Tale
Earlier in 2022, Sri Lanka also underwent a bankruptcy crisis. An unprecedented economic meltdown led to large protests across the island nation. The tension escalated in July 2022, when mobs stormed the home of the then-President Gotabaya Rajapaksa, forcing him to flee the country and resign. The new government has been striving to restore Sri Lanka’s battered public finances, including securing a vital IMF bailout.
Potential Bankruptcy Risks Worldwide
An earlier report by the UN Crisis Response Group listed at least nine countries at risk of facing a similar fate as Sri Lanka. These include Afghanistan, Argentina, Egypt, Laos, Lebanon, Myanmar, Pakistan, Turkey, and Zimbabwe.
Additionally, a survey conducted last year by the economic research institute Visual Capitalist identified at least 25 countries at risk of bankruptcy, including Ghana. These countries were identified based on four metrics: government bond yields, 5-year credit default swaps (CDS), interest burden as a percentage of gross domestic product (GDP), and government debt as a percentage of GDP.
The list of 25 countries at risk of bankruptcy includes El Salvador, Tunisia, Pakistan, Egypt, Kenya, Argentina, Ukraine, Bahrain, Namibia, Brazil, Angola, Senegal, Rwanda, South Africa, Costa Rica, Gabon, Morocco, Ecuador, Turkey, Dominican Republic, Ethiopia, Colombia, Nigeria, and Mexico.
Conclusion: A Global Issue of Concern
The rising instances of bankruptcy among nations worldwide is a matter of grave concern. This not only affects the economic stability of the nations involved but also poses a threat to global economic security. As such, it is essential for world leaders and international financial institutions to collaborate and come up with effective measures to avert these crises and ensure global economic stability.
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