The public debt crisis and debt overhang: ‘’no easy way out’’

By Richmond Akwasi ATUAHENE ( Dr.)

1.0 Introduction/Background

In 2022, a confluence of preexisting structural bottlenecks and external shocks brought Ghana into a deep macroeconomic crisis. Even before the COVID-19 pandemic, Ghana maintained an expansionary fiscal stance, financed largely by commercial debt (external and domestic).

The COVID-19 pandemic and the Russia’s invasion of Ukraine, combined with the tightening of global financial conditions, exacerbated the country’s macroeconomic vulnerabilities. In 2022, the combination of tightening financial conditions, rapidly rising debt levels (from 79.6 percent of gross domestic product [GDP] in 2021 to 92.4 percent of GDP in 2022), high inflation (from 12.6 percent in December 2021 to 54.1 percent in December 2022), steep depreciation of Ghana’s currency, and the dwindling foreign international reserves led to a macro-financial crisis and loss of access to the Eurobond markets.

The loss of access to the Eurobond market, combined with high levels of uncertainty and loss of investor confidence, led to large capital outflows, which in turn added to the pressures on the exchange rate and created a negative feedback loop with inflation. In 2022, inflation continued to rise despite monetary tightening and decelerating economic activity. As the Government of Ghana (GoG) turned increasingly to the domestic financial sector for funding, market interest rates rose and became a hindrance for the private sector, while banks built excessive exposure to the sovereign.

These developments severely curtailed the post-COVID-19 economic recovery as growth slowed down to 3.1 percent in 2022. As growth slowed down and inflationary pressures continued to build, tax revenues plummeted, and investors began to lose confidence in Ghana’s public debt sustainability (World Bank/IDA/ Report No: PAD00050/2024).  In December 2022, Ghana announced a restructuring of its debt and sought International Monetary Fund (IMF) support through the Extended Credit Facility (ECF).

On December 5, 2022, the GoG announced its Domestic Debt Exchange Program (DDEP), which was completed in September 2023. On December 19, 2022, Ghana announced a moratorium on all official bilateral and commercial external debt repayments and requested debt treatment to the Paris Club under the G20 Common Framework. Ghana restructured its domestic debt in two phases, the largest share of which was held

by financial institutions . The first phase was completed on February 21, 2023, and covered local currency domestic bonds issued by the Government and select state-owned enterprises (17.8 percent of GDP). The total amount exchanged was GHS 82.9 billion (US$7.2 billion) or 85 percent of the GHS 97.7 billion (US$8.5 billion) eligible bonds. Financial institutions tendered GHS 60.6 billion (US$5.3 billion), with banks alone tendering GHS 48.4 billion (US$4.2 billion).

The second phase was completed in September 2023 and covered locally issued US$ government bonds (1.1. percent of GDP), cocoa bills issued by the Cocoa Marketing Board (1.4 percent of GDP), and bonds held by pension funds (4.4 percent of GDP). Investors were offered new bonds with lower coupon rates and longer maturities. As a result, the weighted average interest rate on domestic debt reduced from 21.2 percent at the end of December 2022 to 12.7 percent at the end of September 2023, while the average time to maturity increased from 2.7 years to 6.2 years.

However, with high public debt with its associated debt overhang could burden the economy, as a significant portion of the government’s revenue to be allocated towards interest payments and principals in the next few years. This, in turn, could diminish the amount of funding available for other crucial sectors, such as education, healthcare, and infrastructure. In addition, high levels of public debt could lead to inflation, currency depreciation (devaluation), and other macroeconomic vulnerabilities, which can have a negative impact on the economy (Woo & Kumar, 2015). Ghana’s debt overhang’ problem could also adversely affect private investment if economic agents expect high public debt to mean future high taxes (Pattillo et al., 2006).

Furthermore, the debt overhang could harm economic growth by reducing the availability of public funds for private investment (financial crowding-out) and altering the allocation of government spending. Ghana’s high indebtedness also signals creditors to charge higher interest rates due to the increased risk of default. The traditional view is that high public debt levels can crowd out private investment and reduce economic growth.

This is the situation in 2024 the government continues to borrow a large amount of money in the money market, it has increased the demand for loanable funds, which, in turn, driven up interest rates. Higher interest rates have discouraged private investment as it becomes more expensive for firms to borrow money. This could then lead to a reduction in economic growth and recovery.

The recent Ghana’s debt-rescheduling, debt service restructuring, negotiation for debt forgiveness and debt equity swap are indications that Ghana has moved into debt overhang phase. All these were pursued in order to reduce the negative effects of debt overhang. Bhattacharya, Clement and Nguyen (2013) exert that in a theoretical literature on the relationship between the stock of external and local debt and growth focus on the adverse effects of debt overhang. Ghana debt overhang meant that the country has find resources to settle well over US$ 42 billion over the next ten years.

At the end of October, 2024, Ghana owed US$9.2 billion to the Multilateral Agencies, restructured bilateral debt of US$5.4 billion, restructured commercial debt of US$13.1 billion, domestic restructured debt of GHC 203 billion or US$12.1 billion; GARID debt of US$150 million, First Resilient Development Recovery US$ 300 million; Ghana Digital Acceleration Project US$ 200 million; Accra-Tema Express Way Project US$ 338 million and Energy recovery Debt US$260 million thus creating debt overhang of US$ 42 billion. Ghana’s external debt is composed by 26 percent of multilateral debt (12.9 percent of GDP), 17 percent of bilateral debt (7.5 percent of GDP; of which 65.3 percent is Paris Club), 42 percent bonds (18 per cent of GDP), and 14 percent of commercial debt (5.4 percent).

The completion of the external commercial debt restructuring, which represents about a third of all outstanding debt, is key to further address financing needs and bring debt back to a sustainable path. Ghana domestic debt restructuring in 2022/2023 stands out in African history of sovereign debt restructuring, the government of Ghana reported that it had achieved fiscal savings of GHC 61.7 billion (approximately 30% of domestic debt or 7% of GDP (US$5.1 billion) with a minimal financial disruption. MoF reported that it made fiscal savings of US$2.0 billion of the bilateral creditors while the government made a fiscal savings of US$4.7 billion also enjoyed cash flow relief of US$4.4 billion until 2026.

However, the repayment schedule for restructured commercial debt started in 2023 with US$ 477 million, US$692 million in 2025; US$1.3 billion in 2026, US$1.1 billion in 2027; US$1.1billion in 2028; US$1.1 billion in 2029; US$937million in 2030; US$838 million in 2031; US$811 million in 2032; US$801million in 2033; US$ 735 million in 2034; US$765 in 2035; US$ 932 million in 2036; US$734 million in 2037 and US$514 million in 2038. Bilateral creditors have a more shorter- period of their repayments than the commercial creditors. Still, the social dislocation and economic harm Ghana is going through have begun to be recognized. In 2024, the government for its handling of the Ghana debt crisis, should have rendered unreservedly apology to Ghanaians and generations unborn.

But the pain in Ghana lingers. One country in Sub-Sahara Africa, Ghana that has been plunged into virtual bankruptcy. Today, the Ghanaian economy is still characterized by higher inflation and persistent depreciation of the local currency and higher Bank of Ghana policy rate indicating that economy has not stabilized and is undergoing a painful recovery. But the huge public debt owed by the government to multilateral, bilateral, commercial and domestic creditors had cast a shadow over the future.

The Ghanaian populace are still suffering from higher poverty levels as the World Bank in 2024 indicated that 30.3% (10 million) are the abject poverty bracket of enjoining less US$2.15 per day, lower standard of living and higher unemployment. Many still fear for their future except higher net worth people, politically expose persons and their political cronies. During the crisis period, the government, IMF, World Bank and donor partners made a tough and even courageous decisions to restructure the country debt, but it seems that there were miscalculations of the impact on poor, pensioners, farmers and SMEs thus leaving a legacy of fear and mistrust in the political democracy.

The current debt overhang phase clearly demonstrates there is no easy way out for Ghanaians for the next decade. Debt restructuring has raised a major concerns about Ghana future debt sustainability as the government faces increased financing risk and potential default due to its heavy debt obligations in the next five years. It is now more widely understood that the crux of Ghana’s debt problem of excessive public debt, which has led Ghana to be classified as insolvent or bankrupt.

The severity of the debt crises impacted negatively on growth in per capita incomes, poverty levels and private investment rates in the country. The current debt restructuring of domestic, bilateral, and commercial debts showed that the Ghana is on dangerous debt trajectory path because of the overhang nature of country huge debt burden. Ghana is just about replicating the Jamaica debt exchange in 2010 which had introduced another debt exchange program in 2013. Jamaica entered the world economic downturn in 2008 from a position of ongoing weak economic performance and high, increasing debt levels.

As a result, Jamaica’s fiscal situation quickly became unsustainable. Starting in 2010, the government made important efforts, including two debt exchanges (JDX and NDX), to bring its debt trajectory on a sustainable path (Schmid, 2016). Looking the Ghana’s meagre of surrendered gold of US$ 1.2 billion, cocoa export proceeds of US$1.0 billion, inward remittance of US$ 2.8 billion, and non-traditional exports may not be enough to pay the bilateral creditors, multilateral creditors, commercial creditors reschedule dates.

The Ghana may have to consider another debt exchange before the country can bring it debts trajectory on a sustainable path. With hindsight, it is clear that the first debt restructuring had led to a stronger reduction in debt in NPV terms. Not only did interest rates decrease after the exchange, but the interest and principal payments still posed a high burden on the country and that Ghana may require a second debt exchange in 2027 or 2028.

The critical phase of the debt overhang could manifest in 2026 where the country will have to service both principal and interest for the bilateral debtors of US$1.08 billion, commercial debtors of average US$ 1.3 billion and some part of the domestic debtors for the next five years. The Euro bond debt servicing burdens of the coupons and principals. Bilateral repayment and domestic debt repayments starting in 2026 could throw Ghana into a deeper financial and economic crisis never experienced before in the history of country, looking at export revenue records over the past decade. The recent economic downturn has posed significant challenges for Ghana’s financial sector, including the banking, insurance, and pension sectors.

The DDEP introduced additional pressure to a sector which had not recovered fully from the 2018 financial sector clean-up. The mere announcement of the DDEP caused immediate concern due to the high level of exposure financial institutions had to government debt. The program’s combination of moratoriums, maturity extensions, and reduced coupon rates resulted in impairment losses for these institutions, putting their profitability and solvency at risks. Furthermore, the DDEP raises concerns about Ghana’s future debt sustainability.

The government faces increased refinancing risks and potential default due to its heavy debt obligations in the coming years. Without robust fiscal reform over government expenditures, the entire debt restructuring may simply postpone debt obligations rather than achieve its long-term debt sustainability goal. The Government of Ghana must ensure fiscal discipline and efficiency of spending to reduce future debt obligations and consequential risks of default.

The lack of fiscal discipline would only render the touted success of the debt restructuring illusive. Ghana’s fiscal landscape has been characterized by a tax-to-GDP ratio that lags regional and global peers, registering at approximately 12.5 percent in 2022, significantly lower than the sub-Saharan African average of 16 percent (IMF, 2023; World Bank, 2023). This shortfall is even more pronounced when compared with the tax revenue performances of South Africa, Rwanda and Kenya, which stand at 28 percent and 18 percent of GDP, respectively. Such discrepancies underscore the systemic inefficiencies in Ghana’s tax policy and administrative frameworks, which undermine its fiscal capacity and economic stability and stricter control of government expenditure.

2.0. The debt overhang theory

The literature field of economic growth viz, external borrowing is awash with the perceived negative relationship between foreign debt and investment which consequently results into lower capital formation. Krugman (1988) defines this negative relationship as “debt overhang” where the potentials of repayment of outstanding facilities fall lower than the signed value.

The study gave a straight forward definition of the problem of debt overhang as being the anticipated current value of any potential resource allocation that is not up to its outstanding loan. Several scholars have supported the theoretical case for debt overhang. Some of the studies include Krugman (1988) and Sachs (1988). Others like Greene and Villanueva (1991), Elbadawi et al. (1997) and Chowdhury (2001) reaffirmed this by coming up with ample proof that backs the debt overhang phenomenon. In those economies with heavy indebtedness “debt overhang” is considered a leading cause of distortion and slowing down of economic growth (Sachs, 1989; Bulow and Rogoff, 1990). Economic growth slows down because these countries lose their pull- on private investors. Additionally, servicing of debts exhausts up so much of the indebted country’s revenue to the extent that the potential of returning to growth paths is abridged (Levy-Livermore and Chowdhury, 1998). They suggested that even if structural adjustment programs are put in place by governments of these countries, adverse effects can still be felt on development of general economic performance.

It should however be noted that debt overhang does not occur only when a country accumulates too much debt, it can also arise when country’s circumstances in these unfavorable circumstances, creditors loan portfolios will face heavier risks. The outcome would be panic among creditors who rush to cash their claims, and the withdrawal of interest from potential new credits change, making it difficult to manage and discharge its stocks of debts.

Such conditions may emerge because of adverse economic shocks or poor economic policies (Arslanalp and Henry, 2004). When a country finds itself in a situation of debt overhang with difficulties to continue normal debt servicing a situation of uncertainty can appear. Uncertainty could be due to the probable inability to roll over debt, or on what terms debt will be rescheduled, or whether there would be any additional lending.

Governments might react differently depending on uncertainty and events like fiscal contraction or expropriation could become possibilities. In a situation like this external debt would capture many effects that under normal circumstances would need separate consideration. Expectations and uncertainty of future events are therefore of importance in a debt overhang situation and the effects of indebtedness is not known beforehand. Hence the relationship between external debt and investments would therefore be a dynamic one with debt affecting investment with a lag.

3.0 Literature review on debt overhang hypothesis

Various researchers explained debt overhang hypothesis at different times. Borensztein (1996), described debt overhang as a situation when countries found it difficult to service their debt in full and payments are determined by negotiation process with the creditors. Ugwuanyi (2017) states that many developing countries among the sub-Saharan Africa has been trapped by huge external debt which they find difficult to pay. In his view, the problem was compounded by more external loans obtained from the foreign creditors as the deteriorating world prices of primary export goods hindered them to have favourable balance of payments which will enable them to fulfill debt service obligation.

The recent Ghana’s debt-rescheduling, debt service restructuring, negotiation for debt forgiveness and debt equity swap indicated clearly that Ghana has moved into debt overhang phase. All these were pursued in order to reduce the negative effects of debt overhang. Bhattacharya, Clement and Nguyen (2013) exert that in a theoretical literature on the relationship between the stock of external debt and growth focus on the adverse effects of debt overhang.

Debt overhang for a country exists when the country’s debt service burden is so heavy that a large portion of the current output accrues to foreign lenders and consequently creates disincentive to invest (Krugman, 1988, Sachs, 1989). The hypothesis suggests that if there is some likelihood in the future that external debt will be larger than the country’s repayment ability, then the expected debt-service costs would discourage further domestic and foreign investment and harm economic growth (Pattillo et al., 2002).

Potential investors would be afraid that the more the country produces owing to additional investment, the more it would be “taxed” by external creditors in the form of debt service. Thus, investors would be less willing to incur costs today for the sake of increased output in the future as the additional output would be used to meet external debt service requirements. High debt service burden increases expected future taxes on the private sector and lowers private investment.

Resources that might have funded investments are consumed by debt servicing. In addition, debt overhang can worsen economic performance by changing the quality of investment if myopia in policy sets in when quick-yielding projects are favored over higher-valued long-term investments.

This and the uncertainty of debt service repayment create disincentives and difficulties to pursue economic reform (Clements et al., 2003). Debt overhang negatively impacts a country’s economic growth through the adverse impact on investment and policy. Further, the negative impact of high debt on economic growth operates mainly through the negative effect on physical capital accumulation (Pattillo et al., 2003).

That debt overhang adversely affects growth is generally acknowledged² and international programs of debt relief have been put in place to alleviate the problems of growth due to debt overhang.³ Debt relief is expected to stimulate growth by releasing resources from debt service to investments in infrastructure and institutions. Such investments in turn enhance domestic investment as well as attract private foreign investment

The theory of debt overhang was first postulated by Stewart C. Myers in 1977 with his theory of company valuation in corporate finance and the effects of debt-financing. His paper examines why companies do not finance their activities with maximum debt even though there clearly exists a tax-advantage due to the deductibility of interest rates.

The reason, he explains, for this is that high amounts of debt, or debt itself, distorts the possibilities for companies to make optimal future investment decisions. Debt induces a behavior where positive net present value projects do not get undertaken due to the fact that parts of future earnings from projects goes to creditors in the form of promised payments (Myers, 1977). The debt defaults by many developing countries in the 1980s lead to further studies of debt overhang but now in economics and on a country basis. In a 1988 paper Paul Krugman investigated whether debt forgiveness or debt financing is preferable in the case of a defaulting developing country.

This and other literature that Krugman references to is largely focused on the problem from a creditor’s perspective. The definition of debt overhang varies with Krugman defining debt overhang as “the presence of an existing, „inherited? debt sufficiently large that creditors do not expect with confidence to be fully repaid.” A definition that fits our perspective better is the IMF definition that emphasizes the distorted incentives as a debtor. They state debt overhang as “the debt overhang hypothesis does not describe a situation where foreign debt is merely large, but one in which the existence of foreign debt distorts the relevant margins considered for production and investment decisions.” (IMF, 1989 p. 63) Debt overhang refers to the existence of a large debt that has adverse consequences for investment and growth because investors expect that current and future taxes will be increased to effect the transfer of resources abroad.

This definition brings to bear three important concerns: impact on fiscal adjustment, current and future resources to enhance economic growth, and current and future resources and resource flows to enhance private and public investments. Debt overhang refers to the existence of a large debt that has adverse consequences for investment and growth because investors expect that current and future taxes will be increased to effect the transfer of resources abroad. High debt service burden increases expected future taxes on the private sector and lowers private investment. Resources that might have funded investments are consumed by debt servicing.

In addition, debt overhang can worsen economic performance by changing the quality of investment if myopia in policy sets in when quick-yielding projects are favored over higher-valued long-term investments. This and the uncertainty of debt service repayment create disincentives and difficulties to pursue economic reform (Clements et al., 2003). Debt overhang negatively impacts a country’s economic growth through the adverse impact on investment and policy. Further, the negative impact of high debt on economic growth operates mainly through the negative effect on physical capital accumulation (Pattillo et al., 2002)

What is perhaps more worrisome for Ghana is the fact that the composition of the outstanding debt is rapidly changing toward preferred creditors like Eurobonds, bilateral and multilateral agencies, as are the debt-servicing requirements.

These creditors have much less scope for relief arrangements largely for fear of deteriorations in their credit rating. Although international capital markets, bilateral and non-OECD debt still accounts for more than half of the total Ghana’s debt stock, the prominence of multilateral debt has quickly gained ground over the last decade Ghana has currently accumulated a considerable amount of foreign debt to augment income and output.

This debt has emerged from a deficiency of domestic capital needed to fund higher levels of government spending with inadequate domestic financial resources, higher import bills and stagnant export revenues. The consequences of the debt overhang problem for the region’s future are indeed very grave, and more so for critical for the country. The expenditure-crowding-out effects of servicing the rapidly growing stock of debt have empirically been shown in the context of cross-country growth regressions.

Rising debt-service ratios imply reduced availability of resources to support renewal of growth. And because growth cannot be restored the solvency problem deepens in a vicious circle. Indeed, rising debt-servicing requirements along with stagnant exports has meant either defaulting on payment or parting with scarce foreign exchange badly needed for imports required for production and investment.

Real outward resource transfers were effected when servicing requirements were met in the context of rapidly depreciating local currencies. There is sufficient ground to speculate that the internal transfer constraint to servicing debt is probably more severe than the external transfer constraints.

This has been exacerbated by the steep depreciation of local currencies, which raised substantially the local costs of external debt servicing. Ghana’s fiscal distress could worsened, manifesting itself in the forms of severely compressed development budgets and a shrinking fiscal base for providing essential public services. This could happen in Ghana that may have to register significant success in reducing deficits in the future years.

The uncertainty that debt overhang induces could undermine the effectiveness and hence sustainability of an otherwise credible reform program. Furthermore, debt-service burdens are viewed by potential investors as a threat to sustaining reforms and as a potential cause of a higher inflation tax to meet debt-service requirements (Ndulu, 1995; Elbadawi,1996). It is now more widely understood that the crux of Ghana’s debt problem is excessive debt overhang, which could lead Ghana as being classified as insolvent or bankrupt.

The severity of the debt crises could impact negatively on growth in per capita incomes, poverty levels and private investment rates in the country. There are three such channels in which the indebtedness in Ghana is working against growth, the direct channel works through current debt inflows as a ratio of GDP, which stimulate growth, while past debt accumulation (debt overhang) impacts negatively on growth. These two channels produce a debt Laffer curve, which shows that there is a limit at which debt accumulation stimulates growth, in line with resource gap models. When this limit is reached, further debt accumulation impacts negatively on growth. The debt Laffer curve conventionally used usually refers to the relationship between the amount of debt repayment and the size of the debt.

The Laffer curve is used to mean the possible negative effect of debt on growth when the level of indebtedness is very high. Thus, we have growth inducement effects at low levels and growth is retarded at high levels of indebtedness. These results confirm the over-borrowing proposition postulated by Greene and Khan (1990).

The third direct channel works through a liquidity constraint, where debt-service-payment obligations reduce export earnings and thus impact negatively on growth. The final channel is an indirect one and works through the impact of the above channels on public sector expenditures, which impacts negatively on growth debt Laffer curve conventionally used usually refers to the relationship between the amount of debt repayment and the size of the debt.

The Laffer curve is used to mean the possible negative effect of debt on growth when the level of indebtedness is very high. Thus we have growth inducement effects at low levels and growth is retarded at high levels of indebtedness. These results confirm the overborrowing proposition postulated by Greene and Khan (1990).

The third direct channel works through a liquidity constraint, where debt-service-payment obligations reduce export earnings and thus impact negatively on growth. The final channel is an indirect one and works through the impact of the above channels on public sector expenditures, which impacts negatively on growth.

The original formulation of the debt overhang hypothesis centered on the adverse effects of debt on investment in physical capital. How debt overhang might affect and discourage private investments depends on how the respective government is expected to raise fiscal revenue necessary to finance external debt-service obligations (an inflation tax and excessive government expenditure will contribute to increased domestic inflation that also discourages private investment). The other channels that compound the problem are crowding-out effects, lack of access to international financial markets due to solvency indications, and the effects of the stock of debt on the general level of uncertainty in the economy.

These effects combine to discourage private investment and thus have a negative impact on national output growth. Debt overhang is a situation where a borrowing country exceeds its capacity to repay its existing debt, and where the creditor anticipates that the loan will not be repaid in full. A set of economists believe that public debt has a negative impact on economic growth. This view is postulated by the debt overhang hypothesis (Myers, 1977). According to this hypothesis, public debt accumulation limits the ability of the private sector to make future investment decisions that are optimal. Debt overhangs also apply to sovereign governments. In these cases, the term refers to a situation in which the debt of a nation exceeds its future capacity to repay it.

This can occur from an output gap or economic underemployment, repeatedly plugged by the creation of additional credit. The debt overhang proposition is a moral hazard interpretation of the debt crisis. It suggests that a heavy debt burden encourages consumption because the marginal benefit of investment goes to the creditor.

However, some say that the debt overhang proposition has been rejected by empirical specifications of consumption and investment functions. Debt overhang can occur when the face value of debt is 55–60% of GDP or 200% of exports. It can also occur when the present value of debt is 35–40% of GDP or 140% of exports.  Factors that can help limit debt build-up include: government effectiveness, the rule of law, bureaucratic quality, and a sound policy framework for debt reduction.

4.0 The Specific Causes of Ghana’s Public Debt Crisis and Impending Debt Overhang.

First, there is empirical evidence that Ghana’s tax policy architecture also lags the more effective systems employed by its peers. Countries such as South Africa and Kenya have adopted more progressive tax regimes with higher levies on upper-income echelons, thereby harnessing a larger share of economic wealth.

Conversely, Ghana’s tax structure has been less progressive over the years, with lower rates and substantial exemptions that dilute the tax base. For instance, Rwanda and Senegal have instituted comprehensive value-added tax (VAT) systems with minimal exemptions, resulting in augmented VAT collections. Ghana’s VAT framework, while structurally similar, is beleaguered by pervasive evasion and extensive exemptions that compromise its yield (World Bank, 2023).

Second, Ghana has yet to fully capitalize on diversifying its tax revenue streams through the introduction of environmental levies, property taxes, and taxes on digital services, unlike some of its peers. For example, Rwanda and Uganda have implemented successful property tax regimes and environmental taxes, which have contributed to their higher tax-to-GDP ratios. Diversifying revenue streams is critical for enhancing Ghana’s fiscal resilience and sustainability (World Bank, 2023)

Third, high net wealth Individuals including politically expose persons (PEPs) in Ghana (HNWI) are individuals who have accumulated net worth to the level that places them at the very top of the wealth scale in a country (IMF, 2017). Mobilizing tax revenues from the HNWIs presents enormous challenges to tax administrations due to complexity of their financial affairs, possible political influence, and usage of aggressive tax planning to minimize effective tax rates for inability of government to introduce equitable property rates in Ghana.

However, neglecting this highly visible group of taxpayers not only affects the country by sizable reduction of tax revenue collections from them , but can also lead to the erosion of trust in the fairness of tax administration. The perceived unfairness in the tax system could serve as a cancer for tax administration and worsen non-compliance in the wider taxpayer population. High and rising income inequality in Ghana particularly necessitate tax compliance from these wealthy individuals to finance government’s developmental projects, without overburdening the poor.

Fourth, efficient tax administration is crucial for effective revenue collection, but Ghana still faces challenges such as suboptimal compliance, obsolete technological infrastructure, and a lack of robust taxpayer education and support mechanisms. The Ghana Revenue Authority (GRA) is encumbered by deficiencies in data management and audit proficiency, which are critical impediments to its tax collection efficacy. The pervasive informal sector in Ghana’s economy exacerbates these administrative hurdles, as a considerable segment of economic transactions eludes the formal taxation framework (IMF, 2023).

In contrast, countries like Rwanda and Cote d’Ivoire have made advancements in modernizing their tax administration systems. Rwanda has notably harnessed technology to bolster tax compliance through digital filing and payment systems, thereby curtailing evasion and enhancing compliance. Kenya, too, has strengthened its revenue authority with improved audit functions and taxpayer services, which have improved compliance and increased revenue streams (World Bank, 2023). It would help if the program envisaged a stable and credible tax regime that would be characterized by simplicity and clarity and would provide appropriate investment incentives.

Fifth Ghana’s fiscal policy has gone through repeated periods of overspending over the years: to ensure fiscal discipline, the country needs to strengthen its fiscal framework and institutions. Ghana continues to experience lapses in its public financial management systems, which have led to recurring accumulation of large arrears over the years. Arrears are caused by weak budget planning and preparation, poor budget execution (including weak commitment controls), and overall budgetary indiscipline that leads to noncompliance with the fiscal rules (The World Bank 2022).

Poor public investment management (PIM) has led to projects proliferation, prioritizing new projects following ineffective project appraisal. Finally, budget credibility is low, both on the revenue and expenditure sides, as fiscal rules are not binding and the budget process does not leverage existing frameworks (World Bank 2023).

Sixth, Ghana’s tax system does not generate as much revenue as it could because there are many reliefs which narrows the corporate income tax (CIT) base. Between 2015 and 2020, Ghana has missed out on an average of about 1.3 percent of its GDP in corporate tax revenue each year. Part of the reason for this is that there are more than two dozen different types of tax breaks for companies.

According to the World Bank, these tax breaks cost Ghana around 0.5 percent of its GDP in lost revenue each year. By reducing or eliminating some of these generous tax breaks, Ghana could improve its tax system and collect more revenue from corporate taxes. In addition, the tax regime appears to be undergoing major changes every twelve months, something which contributes to the confusion and is probably the biggest disincentive to investment and the recovery of the Ghana economy

Seventh, Ghana’s fiscal policy has gone through repeated periods of overspending over the years: to ensure fiscal discipline, the country needs to strengthen its fiscal framework and institutions. Ghana continues to experience lapses in its public financial management systems, which have led to recurring accumulation of large arrears over the years. Arrears are caused by weak budget planning and preparation, poor budget execution (including weak commitment controls), and overall budgetary indiscipline that leads to noncompliance with the fiscal rules (The World Bank 2022).

Eighth, another contributing factor to the current public debt crisis and the future debt overhang have been the government’s flagship programs like FSHS, Agenda 111 and IDIF over the past seven years without proper planning and budgetary allocation. The government flagship programs have enjoyed budgetary allocation worth GH¢33 billion in a span of three years (2020-2023) and added to the country’s domestic debt crisis.

According to IMF Country Report on Ghana (23/168) Ghana spent close to 4 percent of GDP on secondary education with good results in terms of enrollment but poor learning outcomes. The flagship program Free Senior High School (SHS), which covers the full cost of secondary education, has helped increase enrollment but is poorly targeted. Key identified areas of potential improvement in education spending include strengthening primary education resources, better teacher training, and stronger performance-based funding practices.

The flagship programs captured in the report include Free SHS, Planting for Food and Jobs (PFJ), One-district, One-factory (1D1F), Infrastructure for Poverty Eradication Program (IPEP), Ghana School Feeding Program, Railways Development, Agenda 111 and Coastal Fish Landing Sites. For education, it said Ghana spends close to 4% of GDP on education with good results in terms of enrollment but poor learning outcomes. It pointed out that the flagship program Free Senior High School (FSHS), which covers the full cost of secondary education, has helped increase enrollment but is poorly targeted.

Ninth, there is empirical evidence that the failure on the part of previous and present governments to improve revenue by generating more revenue from the extractive sector through renegotiating some mining contract leases. Countries like Bostwana has adopted proactive stands and renegotiated their Diamond Leases with Anglo American De Beers.

The country had not benefitted from the extractive industry like Gold. Gold total production in 2022 was US$6.6 billion which was surrendered portion to Ghana’s Balance of Payment which was credited to the Bank of Ghana Nostro Account only US$ 865 million equivalent to only 13.1%. In 2023, total gold produced was US$7.6 billion and surrendered value was only US$1.2 billion. From the period between2014 to 2023 Ghana has extracted US$ 51.2 billion worth of Gold, and the country has only received a meager US$ 7.6 billion accounting for only 14.8% over the period under review

Tenth, one major factor that has contributed to the current public debt crisis and  debt overhang could be the unresolved energy sector debt since 2014. Ghana’s energy sector debt has been a major contributor to her current public debt crisis. According to the IMF country’s energy sector arrears stood at US$1.6 billion about 2.3% of GDP at the end of 2022. It pointed out that energy sector payables increased due to low recoveries in the sector, tight financing conditions, and pending negotiations with independent power producers (IPPs).

The power sector has emerged as a significant fiscal burden, costing about 2 percent of GDP annually due to persistent losses. The power crisis from 2012 to 2016, precipitated by the failure of the West African Gas Pipeline, led to severe energy shortages. In response, high-cost thermal power was rapidly procured, engaging private independent power producers under take-or-pay agreements. This approach resulted in surplus installed capacity and financial commitment for power that was neither consumed nor compensated through revenues or tariffs.

Coupled with the underpricing of electricity and the subpar performance of distribution companies, this situation has led growing sector arrears. At the end of 2022, the accumulated power sector arrears (legacy arrears) were estimated at US$1.319 billion; and the power sector shortfall for 2023 alone was US$1.528 billion.

The gas sector contributed an additional US$128 million in losses, bringing the total energy sector shortfall for 2023 to US$1.7 billion. Since 2019, an average of 1.7 percent of GDP each year has been transferred from the budget to address the sector’s recurring financial deficits. It is anticipated that these annual shortfalls will continue to be covered through fiscal transfers in the foreseeable future unless a firmer implementation of the Energy Sector Recovery Program (ESRP) is in place that permanently closes the sector financial shortfalls.

The energy sector’s losses require annual budgetary transfers, putting a major strain on public finances. In 2022, these transfers amounted to about US$508 million and they are projected to rise to US$1.6 billion in 2023 (about 0.73 percent and 2.17 percent of GDP, respectively).

Moreover, the sector as a whole has accumulated debt or arrears (from ECG to private suppliers) that stood at US$1.2 billion as of end 2022 (a figure that has since increased). Since the ESRP was only partially implemented, the sector remains in a very challenging financial, debt overhang and operating condition. Without resolute implementation of the 2023 ESRP Amendment (notably on tariffs and operational and financial efficiency improvements of the main distribution utilities) the cumulative deficit of the energy sector could reach US$8.9 billion by 2025, to be eventually borne by the budget.

Eleventh, empirical evidence clearly showed that the failure on the part of Bank of Ghana to adequately track, trace and capture all inward remittances over the past decade had impacted negatively on Ghana’s Balance of Payment, rapid depreciation of the local currency against the major trading currencies as well as impacted on the Ghana’s public debt crisis as well as country’s debt overhang.

According to the World Bank global remittance inflow reports on Ghana from 2014 to 2023: recorded US$ 2 billion in 2014; US$ 5 billion in 2015; US$ 3 billion in 2016; US$ 3.5 billion in 2017; US$ 3.5 billion in 2018; US$ 4.1 billion in 2019; US$ 4.3 billion in 2020; US$ 4.5 billion in 2021; US $ 4.7 billion in 2022; US$4.63 billion in 2023 thus giving grand total of US$36.23 billion, while the Auditor-General’s Report on Bank of Ghana’s Consolidated Statements of Foreign Exchange Receipts: Schedule of earnings from 23 authorized dealer commercial banks at the period between 2014 to 2023 indicated that actual Transfers recorded as—Inward Remittances recorded US$ 2.1 billion in 2014 US$ 2.0 billion in 2015   US$1.8 billion in 2016; US$10.7 billion in 2017; US$1.0 billion in 2018 US$2.0 billion, in 2019; US$2.3 billion in 2020; US$2.1 billion in 2021; US$2.1 billion in 2022 ;  US$2.8 billion in 2023.

The total remittance inflows of US$28.9 billion for period. The difference between World Bank Data of US$ 36.23 billion and that of Bank of Ghana’s data of US$ 28.9 billion thus leaves negative variance of US$ 7.33 close to total surrendered value of gold export of US$7.6 billion for the ten- year review period.

Twelfth, there is enough evidence to show that one key factor that has contributed current debt crisis in Ghana has been the endemic corruption prevailing in the public sector, as huge fiscal revenue continues to be lost, impeding the ability of the government to invest in public social spending using domestic revenue.

Corruption is a serious barrier to effective resource mobilization and allocation, and diverts resources away from activities that are vital for poverty eradication and economic and sustainable development The 2022 Auditor General’s report shows that irregularities in the public sector in 2021 amounted to about GH¢17.5 billion. Similarly, the Auditor General’s COVID-19 expenditure report shows that US$81 million worth of vaccines paid for by the state were never delivered, among other infractions.

Finally, the timing of the measures undertaken does not appear to be effective either. A lot of political capital is being spent on measures that have small and delayed effects on growth and competitiveness, like the liberalization of some professions, and too little on measures that have significant effects on the reduction of the fiscal deficit. This lack of appropriate priorities has already created reform fatigue, without significant effects on either fiscal adjustment or economic growth and employment

Findings

The current public crisis and the future debt overhang could impact negatively on the country poverty levels in the years ahead. World Bank (2024) noted that the economic crisis has taken a toll on poverty reduction efforts due to weak growth and constrained government spending, affecting living standards and bringing poverty levels (measured at the international poverty line of US$2.15 a day) to an estimated (10 million out 33 million people or 30.3 percent in 2023, a worsening of 3.5 percentage points since 2022, with expected further deterioration to 33.2 percent by 2025. The economic crisis has taken a toll on poverty reduction efforts.

The pace of economic growth decelerated to 2.9 percent in 2023 from 3.8 percent in 2022 and is projected to remain weak in 2024. Despite efforts to protect the vulnerable, social conditions are challenging, which is fueling citizen opposition to some reforms (including the implementation of some revenue measures included in the 2024 budget). Weak growth and constrained public spending have bolstered poverty levels and undermined the living standards of the population. Poverty—measured at the international poverty line of US$2.15 a day—is estimated at 30.3 percent in 2023, a worsening of 3.5 percentage points since 2022.

The burden of the crisis (high inflation and lower growth in particular) has fallen on the vulnerable segments of the population: the international poverty rate (2.15 in 2017 US$ Purchasing Power Parity) is estimated to have increased to 30.8 in 2023 up from 25.2 in 2017. The inflation shock alone is estimated to have pushed over 800,000 Ghanaians into poverty. Food insecurity has also worsened.

The finding has also revealed that Ghana’s debt overhang with large debt has negative consequences for its growth and investment. This could lead to: reduced resources for growth, lower per capita incomes, lower private investment rates , difficulty with fiscal adjustment, be a threat to reform programs, create uncertain future growth prospects and will also increase  the country’s poverty levels for the next five years ahead. In those economies like Ghana and Argentina with heavy indebtedness, “external debt overhang” is considered a leading cause of distortion and slowness of economic growth.

Ghana’s economic growth could slow down because these foreign countries lose their pull -on private investors while servicing of debts exhausts up so much of the indebted country’s revenue to the extent that the potential of returning to growth paths is abridged.

The current public debt crisis and the future debt overhang affected severely on the private sector credit growth. Bank credit to the private sector remains weak. As of April 2024, private sector credit growth stood at 10.8 percent of GDP, contrasting starkly with the 19.8 percent growth observed in April 2023. In real terms, credit growth contracted by 11.4 percent in April, only a modest improvement from the 15.2 percent contraction recorded a year earlier, reflecting the persistence of risk aversion among banks due to the macroeconomic crisis and consequent increase in non-performing loans (NPLs) of banks.

Conversely, by February 2024, banks’ allocations to Government and Bank of Ghana instruments had surged to ?53.6 billion, marking a significant year-on-year increase of 67.6 percent, surpassing the 36.9 percent increase recorded for the corresponding period in 2023. This trend raises concerns as it underscores the phenomenon of crowding out private sector borrowing, with potential adverse implications for overall economic growth prospects.

Another finding the domestic debt exchange has hampered economic growth through the debt overhang effect and the crowding out effect. Heavy public debt service obligations resulted in a large risk premium on interest rates, periodic bouts of financial market instability, and a crowding out of bank credit to the private sector all of which had contributed to a very low potential growth rate.

One negative effect of domestic debt restructuring is that it has caused investors to lose confidence in the country’s ability to repay its debt on time. This has led to a decrease in domestic companies & specialized deposit taking institutions), domestic debt exchange had both direct and indirect effects. The direct effect was that the restructuring has resulted in a loss of value for domestic bondholders. This has led to a decrease in demand for Ghana government bonds and a decreased in the overall value of the bond market. The indirect effect was that the restructured domestic debt has affected the stability of local financial institutions especially in the area of liquidity and solvency.

If the government was unable to manage its domestic debt exchange process properly, the economy has suffered as a result, Cocoa Board had face increased risks and potentially experienced financial difficulties.

This has led to a decrease in the availability of credit for local businesses as well as higher cost of credit and households, thus hindered economic recovery and growth. Ghana’s balance of payments is expected to continue to deteriorate further in 2024, on the back of continued capital outflows, and the continued Cedi depreciation as a result of decline inward remittances, low returns on extractive industries like gold and poor cocoa syndication loan of US $ 800 million lowest recorded over the past two decades.

The decreased domestic investment has a ripple effect on the local economy. As businesses including SMEs have struggled to access the funds they need to grow and hire workers, the unemployment rate in Ghana has dramatically increased. This lack of investment has also led to an increase in the cost of borrowing for the government and local businesses, making it more difficult for them to finance their operations and invest in growth. In terms of the effects on the domestic bond market and local financial institutions (banks, insurance, asset management

The excessive public domestic debts with its domestic debt exchange program (DDEP), which included substantial haircuts on bond values, has particularly distressed the fund management sector. Many fund management companies, which held large positions in government bonds, found their assets sharply devalued, leading to a crisis of asset-liability mismatches. These companies are now facing severe liquidity challenges, struggling to meet withdrawal demands from their clients, which further amplifies the atmosphere of financial instability. Banks, too, are experiencing acute liquidity challenges as a direct consequence of the debt exchange.

The restructuring of government bonds has led to significant capital losses for banks, forcing them to tighten credit in an effort to shore up their balance sheets. This reduction in lending capacity has precipitated a ‘credit crunch,’ severely restricting the availability of loans for businesses and consumers. This contraction in credit is particularly damaging in a developing economy like Ghana’s, where access to finance is crucial for business operations and expansion The impact of the DDEP on banking institutions in Ghana revealed significant impairment losses, liquidity constraints and solvency risks. The effects were particularly acute for smaller, less-capitalized banks, which struggled to absorb the losses

Conclusion

Post debt restructuring has slowed down economic recovery through the debt overhang and crowding out problems accompanied a financial crisis lower country’s net worth, if the country has been carrying debt, the loss of net worth brought Ghana closer to default which has impacted negatively on country’s reputation and credibility.

Debt exchange has caused debt overhang which occurred as there was a significant probability that a Ghana could go bankrupt in the near future. On the one hand, public debt can provide financing for investments in infrastructure and other projects that can stimulate economic growth. On the other hand, like Ghana high levels of debt has hindered economic growth.

Only with prudent fiscal discipline, domestic revenue mobilization to address the growing financing needs in the country, efficient debt management strategies to prevent the misuse of debt and corruption, and improved prioritization of needs are some of the policy options to mitigate the adverse impact of high public debt on economic growth.

The debt overhang has reduced the incentives of new domestic investors to invest in business capital because, in the event of default, part of the return on new investment accrues to existing creditors. Debt overhang has also led deterioration of the fiscal outlook which has resulted to fiscal measures such as tax increases and without government spending cut which has reduced economic activity, thus lowered household and firm incomes.

This has led to a deeper reduction in tax revenues and further undermined the fiscal position. Debt overhang also has decreased country’s incentives to invest their current revenue in financial assets because these assets are easier to liquidate when business conditions deteriorate and bankruptcy becomes more likely. On both counts, the rate of investment in social infrastructure is adversely affected.

Thus, debt overhang has been one of potential explanations for why domestic firms have been reluctant to expand capacity in this recovery. The macroeconomic consequence of this reluctance to invest is a slow recovery. Post- DDEP experience showed that crowding out has led to higher interest rates on banking credit facilities that has slowed down economic growth.

As the government has aggressively borrowed funds from money market (Treasury Bills market) to finance its spending, it has been competing with private borrowers or available funds. This competition between government, banking institutions and private sectors have driven up interest rates (i.e. higher treasury bill rates), which has made it more expensive for businesses to borrow money for both working capital and expansion. Ghana’s public debt remains unsustainable with a successful completion of the external commercial and bilateral debt restructuring.

The DDEP has raised concerns about Ghana’s future debt sustainability. The government faces increased refinancing risks and potential default due to its heavy debt obligations in the coming years. Without robust fiscal reforms and strict control over government expenditure, the Debt restructuring may simply postpone debt obligations rather than achieve its long-term debt sustainability goal Weak fiscal and economic performance over extended periods of time could lead to an unsustainable fiscal situation for Ghana in the 2024 post- election period. The high level of debt and the related interest rate payments are going to the major problems that Ghana may to face.

Improving domestic revenue mobilization in Ghana remains a critical milestone in the country’s debt overhang phase. The first step in improving corporate tax revenue is an establishment of taxpayer databases. Infrastructure is critical for making other interventions possible and effective. Since economy payment systems are important for easily accessing information about taxpayers, encouraging and compelling digital payments could help improve revenue mobilization. Deterrents and other messages to boost taxpayer morale, if appropriately designed, could also be effective in encouraging tax filing and compliance.

The introduction of minimum tax schemes and tax -deductible laws can be promulgated to reduce substantial corporate tax evasion and increase domestic revenue mobilization. Fully refundable withholding taxes, especially for online transactions, could be introduced to secure revenues. With regards to personal income taxes and property taxes especially taxing the affluent and High Net Wealth individuals including Politically Exposed Persons (HNWI and PEPs), designating an office with appropriately trained and resourced staff and establishing clear strategies is recommended, as taking on HNWIs is a politically sensitive issue.

Policy Recommendations

The debt restructuring must be underpinned by strong fiscal consolidation, to be necessary to reverse the adverse fiscal dynamics and reduce the debt overhang and crowding out that had plagued Ghana for the past decade. These significant efforts to reduce fiscal dominance were to be aimed at encouraging private sector investment in order to catalyze the underlying conditions for robust economic growth. The experiences of many of the countries that have undertaken some form of debt restructuring suggests that the transformation to virtuous cycle of sustained macroeconomic improvement hinged strongly on a substantially improved external environment which facilitated an export?led recovery.

Russia (1999, 2000) and Ecuador (2000), for example, benefited from the dramatic rise in oil prices following their restructuring. Similarly, Uruguay (2003) and Argentina (2001) had significant positive terms of trade windfalls arising from commodity prices with average growth rates of about 8.0 per cent between 2004 and 2008. Ukraine’s post?crisis recovery was primarily driven by a rapid expansion in exports to Russia. The x?axes in the graphs depict quarters, where quarter 2 coincides with the debt exchanges and China as well as buoyant international liquidity conditions in 1999 ( Schmid, 2016).

However, the global conditions to reinforce a meaningful post?restructuring recovery did not exist at the end of both debt transactions for Ghana especially given its very narrow export base. Notwithstanding the absence of a favorable external economic climate, a depreciated but stable real exchange rate is a critical component of Ghana’s economic program which will increase profitability of the tradable sector. This boost in competitiveness is expected to catalyze strong GDP growth, reduce unemployment and strengthen the current account which should result in a more sustainable reduction in Ghana’s debt?to?GDP.

Second, the government must ensure fiscal discipline and efficiency of spending to reduce future debt obligations and consequential risks of default. The Government of Ghana must ensure fiscal discipline and efficiency of spending to reduce future debt obligations and consequential risks of default. The lack of fiscal discipline would only render the touted success of the debt restructuring illusive. Ghana’s tax collection is low compared with other lower middle-income countries. Non-compliance of tax payments is an urgent issue in Ghana, as the government has been suffering from a widening fiscal deficit, a rising debt burden and debt overhang.

Third, there is a need for effort on the policy front should be accompanied by strengthening of the institutional fiscal framework. Going forward, it is imperative to swiftly re-establish a fiscal rule that is transparent, measurable, and legally binding. The fiscal rule should acknowledge the business cycle and economic volatility, containing fiscal spending in good times to generate fiscal space for a more forceful countercyclical actions when needed. The introduction of the fiscal rule should be accompanied by reinstituting an empowered and independent Fiscal Council.

The Council’s financial autonomy can be ensured by appointing council members through an open and accountable procedure and delineating explicit mandates. To enhance fiscal transparency and accountability, improving existing citizen engagement mechanisms within the budgetary process is key to create opportunities for public input and dialogue on fiscal policies through public consultations, the publication of a much friendlier citizen budget summaries, and the initiation of participatory budgeting programs. Furthermore, accountability could be amplified by strengthening parliamentary oversight, mandating independent financial audits on timely basis, and enforcing sanctions for non-compliance with established fiscal regulations.

Fourth, improvements in expenditure management, in particular public financial management and procurement, are key for the sustainability of the fiscal effort. Fast-track actions are needed to integrate all spending accounts into the Treasury Single Account and improve cash forecasts to aid effective cash management and prevent the accumulation of arrears.

To minimize arrears for capital expenditures, fast track measures are also necessary to capture multi-year commitments and contracts in line with Medium-Term Expenditure Framework ceilings, starting with the road sector, and further ensure that all entities use the GHANEPS for all procurement activities.

Going forward, it is imperative to swiftly re-establish a fiscal rule that is transparent, measurable, and legally binding, supported by an empowered and independent Fiscal Council. Improving existing citizen engagement mechanisms within the budgetary process and amplifying accountability by strengthening parliamentary oversight is key to enhance fiscal transparency and accountability (World Bank economic update, 2024)

Fifth, there is urgent need for comprehensive structural reforms to foster economic diversification and promote long-term inclusive growth in Ghana. Embarking on long-term structural reforms is a necessary step to enhance private sector growth and bolster the attractiveness of foreign direct investment.

Key reforms entail promoting special economic zones, fortifying the insolvency framework, improving access to long-term finance, addressing challenges in the energy sector, and enhancing the business environment by refining the legal and regulatory landscape for foreign investors.

The World Bank has been supporting Ghana by helping operationalize the Development Bank of Ghana, reducing minimum foreign capital requirements to attract foreign direct investment, and finalizing the new policy for special economic zones. Additionally, expediting digitalization efforts and capitalizing on opportunities presented by the Africa Continental Free Trade Agreement through integration into global value chains are crucial.

These efforts should be complemented by initiatives to expand targeted social protection programs, mitigating the adverse effects of the crisis and fiscal consolidation on the impoverished and most vulnerable segments of society. Enhancing social safety nets would help promote social inclusion and accumulate human capital, ensuring its productive use and effective protection (World Bank economic update, 2024).

Sixth, Ghana must enhance domestic revenue mobilization for fiscal sustainability. To prevent the debt overhang   enhancing revenue mobilization is therefore imperative. A thorough and comprehensive review of the existing tax policy and administration is crucial to identify actionable measures that could be implemented in both the short and medium term. Such an approach will be instrumental in addressing the underlying issues and improving overall revenue collection.

Further, Ghana must fully capitalize on diversifying its tax revenue streams through the introduction of environmental levies, property taxes, and taxes on digital services, unlike some of its peers. For example, Rwanda and Uganda have implemented successful prop Read Full Story