ABSTRACT
This chapter considers issues of both historical and prospective nature raised by the rise in debt since the 1980s. It outlines the history of the debt, the dimensions of the debt, and the cause of the growth in debt. The chapter looks at the debt burden and explores why debt servicing appears to be a major problem and the distributional effects on public spending. It also explores the risks and policy challenges of the debt and provides how countries have dealt with large debts and the lessons for Ghana. Noticeable about Ghanaian debt is the rising debt occurred in peacetime, concurrently with unprecedented privatization, liberalization and a transformation of the economy. Fiscal deficits appear more important in the determination of the domestic debt. An investment surge in areas that would enhance exports or replace imports can generate in the medium to long-term sufficient growth in income and foreign exchange to service the debt and perhaps, eventually, to eliminate it.
