Markets: The rise of invisible debt
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Markets: The rise of invisible debt

It is not just corporations and states that have built up record debt levels: the indebtedness of the booming sub-sovereign market – especially among state-owned enterprises – can be difficult to see until something goes wrong. Should investors be spooked?


When the IMF granted the Republic of Ghana a three-year bailout arrangement under its extended credit facility in 2015, the multilateral development bank did not fully grasp how much debt the overburdened country really had. 

The IMF was aware that the country’s poorly managed state-owned enterprises (SOEs) were a large part of the problem and had to be reformed. In 2015, according to the IMF, SOEs were responsible for losses of 1.8% of GDP and gross liabilities of 13.7% of GDP, mostly due to the country’s struggling energy sector.

But soon after presidential elections in December 2016, when the country’s opposition party took power, anomalies were uncovered in the government’s balance sheet.

First, the New Patriotic Party found C7 billion ($1.57 billion) in arrears related to Ghana Integrated Financial Management Information System – a programme in part meant, ironically, to reform government contracts and expenditure.

The debt, commentators say, was largely taken out by the SOEs Ghana was supposed to be cleaning up as part of its terms with the IMF, which included a ban on accumulating arrears.

The true level of a sovereign’s exposure may not be evident until its fiscal situation begins to deteriorate – something many people will remember from the global financial crisis, with bank exposures to subprime mortgages and CDS. 

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