What do you know

… About sovereign guarantees and contingent liabilities?

By Desmond Isaac ADDO

Email: [email protected]

A few days ago, news broke that some Ghanaian traders had been killed in a terrorist attack while travelling outside the country.

They were not diplomats.
They were not soldiers.
They were tomato traders.

They had crossed the border to buy tomatoes to bring back home to sell in Ghana’s markets; the same markets that feed families every day.

Their deaths were a tragedy. But their journey also raises a difficult economic question:

Why are Ghanaian traders travelling across borders in search of tomatoes?

Tomatoes are not rare. They are a staple in our homes. Yet seasonal shortages, post-harvest losses, weak storage systems, limited irrigation, and underdeveloped agro-processing often make domestic supply unreliable. When supply tightens locally, traders look elsewhere.

And when they do, they carry the risks themselves; transport risk, currency risk, border risk, and sometimes, security risk.

At first glance, this story may seem far removed from public finance. But it is not.

It is a story about exposure and uncertainty.

When private individuals cannot manage uncertainty alone, markets adjust. When markets cannot manage it effectively, governments are often called upon to step in.

That is where sovereign guarantees enter the conversation.

A sovereign guarantee is a promise by the government to repay a loan or meet an obligation if the original borrower fails to do so. In simple terms, the state says: “If they cannot pay, we will.”

Governments use guarantees to reduce uncertainty and attract investment into sectors that might otherwise appear too risky.

Imagine a large irrigation scheme designed to stabilize tomato production in northern Ghana. Or a cold-chain logistics network to reduce post-harvest losses. Or an agro-processing facility to absorb excess supply during peak seasons.

These projects require long-term financing. Private lenders may hesitate because agricultural output depends on weather, market prices fluctuate, and repayment can be unpredictable.

A government guarantee can reduce that hesitation. It reassures banks that if revenues fall short, the state will step in. The project moves forward. Investment flows. Domestic supply strengthens. Traders no longer need to travel as far.

But here is the critical point.

When a government issues a guarantee, it does not immediately spend money. No cheque leaves the treasury on the day the document is signed.

Instead, the obligation becomes what economists call a contingent liability – a financial commitment that only turns into actual debt if a specific event occurs.

If the irrigation project fails.
If the agro-processor cannot repay its loan.
If revenues collapse.

Then the guarantee is triggered. And taxpayers ultimately bear the cost.

This is the delicate balance.

Sovereign guarantees can unlock development. They can support agriculture, energy, transport, housing, and industrialization. They can help build infrastructure that reduces the everyday burdens citizens carry.

But they also transfer financial exposure from private investors to the public purse.

If too many guarantees are issued without proper assessment, monitoring, and disclosure, they accumulate quietly. They may not appear prominently in headline debt figures, but investors and credit rating agencies watch them closely.

When economic shocks occur, currency depreciation, commodity price swings, global crises, contingent liabilities can suddenly materialize. What once looked like a simple promise becomes real debt.

This is not an argument against guarantees.

It is an argument for discipline.

Governments must:

• Carefully evaluate which projects truly deserve public backing
  • Assess the probability of default
  • Set limits on total exposure
  • Disclose guarantees transparently
  • Strengthen oversight of state-owned enterprises

Used wisely, sovereign guarantees are tools of strategic development. Used recklessly, they become future fiscal stress.

The story of the tomato traders reminds us that exposure exists at every level of the economy. Individuals manage it. Businesses manage it. And sometimes, governments absorb it.

But whenever the state absorbs risk, it does so on behalf of its citizens.

Every guarantee signed today is a promise made in our name.

This conversation has become even more timely with the passage of the 24-Hour Economy Authority Bill, recently signed into law by President John Dramani Mahama. The law gives legal backing to Ghana’s flagship strategy to expand productivity, attract investment, and stimulate round-the-clock economic activity.

At its core, the 24-hour economy is about correcting the structural weaknesses that force traders to cross borders in search of basic commodities. It is about building resilient supply chains, strengthening agro-processing, improving logistics, and creating infrastructure that keeps markets functioning consistently.

But ambition requires financing.

As the Authority coordinates investment across agriculture, manufacturing, energy, logistics, and services, private investors will inevitably ask difficult questions:

Who absorbs losses if projects underperform?
Who stands behind large-scale infrastructure financing?
How secure are long-term returns?

In answering those questions, sovereign guarantees and contingent liabilities quietly return to the center of the discussion.

If structured prudently, public backing can unlock the capital needed to make the 24-hour economy a reality. If structured recklessly, it can shift excessive risk onto future budgets.

The 24-Hour Economy Authority could indeed be a game changer for the nation. It could catalyze innovative financing structures, crowd in private capital, and drive national progress.

But progress is not powered by vision alone.

It is sustained by sound risk management.

If we are to build an economy that operates around the clock, we must ensure that the financial commitments behind it are managed just as carefully; so that the promise of growth today does not become the burden of debt tomorrow.

Let’s imagine this.

Ghana spends tens of millions of dollars each year importing tomato paste and related products, despite producing large volumes of fresh tomatoes locally. Yet post-harvest losses are estimated to reach as high as 30-40 percent of production because of weak storage, limited processing capacity, and inefficient distribution systems.

Now imagine if those losses were drastically reduced.

Imagine cold-chain facilities and processing plants across the tomato belt, in the Northern, Upper East, and Savannah regions, storing, processing, and selling at scale. Imagine factories operating day and night under a 24-hour production model, turning fresh produce into paste, sauces, and canned products for local markets and export.

With carefully structured sovereign guarantees in place, private lenders would feel more secure financing irrigation schemes, warehouse infrastructure, and processing facilities. Investors would see predictable returns instead of seasonal volatility. Entrepreneurs would see stable supply instead of uncertainty.

Instead of spending millions on imports, Ghana could retain value within its own economy, creating jobs, strengthening supply chains, stabilizing prices, and advancing industrialization.

That is how responsible public risk-sharing becomes real economic progress.

So, the real question remains:

What do you know about sovereign guarantees and contingent liabilities – and are we using them deliberately and managing them wisely enough to protect the future we are trying to build?

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