22/08/2025
Krobea Kwabena Asante writes….. ✍️
THINKING ALOUD:
The Balance of Payments Manual published by the International Monetary Fund (IMF) defines Foreign Direct Investment (FDI) as a category of international investment that reflects the objective of a resident in one economy (the direct investor) in obtaining a lasting investment interest in an enterprise resident in another economy.
FDI ensures greater influx of capital investment and foreign exchange earnings in the host country and an important driver of sustainable development and economic growth.
A nation's economic health and prospects is measured not just by the volume of FDI, it attracts, but by the ability of that investment to generate sustainable long-term growth and fiscal space.
A comparative analysis on the value of interest payment and FDI inflows between 2021 to H1 2025 exposes a significant financial constraint in Ghana's economic model.
The structural weakness in Ghana’s economic model reveals a troubling perspective as foreign direct investment inflows are not sufficient or sustainable to cover the cost on interest payment on central government fiscal operations; that is new foreign direct investment is consumed by old debt obligations, stifling substantive progress toward economic transformation and resilience.
A healthy economy would see foreign direct investment multiply larger than its interest obligations on previous government investment, providing net positive forex for new investment and fiscal space. Ghana's interest payment and FDI inflows nexus reveals a structural and solvency weakness.
The data between 2021 to H1 2025 on FDI inflows and Interest Payment is a lesson that the current economic model Ghana employs only leads to recurrent fiscal constraints. The future depends on a conscious strategic pivot to a production-based economic model.