Falling Debt Must Not Breach Sustainability Limits

By: Solomon Nartey Tetteh

Economic Analyst Ebenezer Otu Okley has cautioned that rising public debt levels could rekindle concerns about Ghana’s debt sustainability, urging authorities to avoid a return to the risky fiscal path that previously pushed the country to the brink of default.

Speaking on Business Breakfast on Zed 101.9FM, Mr. Okley said that although current debt levels are lower than those recorded in the past, government must remain vigilant to ensure that the country does not breach sustainability thresholds.

“Once our debt crosses about US$700 billion, it raises concerns. Even if it is lower than what we experienced before, the focus now must be on ensuring that our debt levels remain sustainable,” he stated.

He recalled that prior to Ghana’s debt restructuring, the country’s debt-to-GDP ratio stood at about 105 per cent, a level he described as extremely risky.

“That was the period when we were facing serious challenges, including the fourth impairment of some of our debts. We do not want to get to that point again,” Mr. Okley noted.

According to him, Ghana’s current engagement under an annual programme places strict emphasis on debt sustainability, with close monitoring to ensure the country does not exceed agreed programme conditionalities.

“This situation reinforces concerns about a possible reversal after debt restructuring. The key issue is to ensure that we do not begin accumulating excessive debt again,” he explained.

Mr. Okley stressed that maintaining sustainable debt levels is critical to preserving the country’s ability to return to the international capital markets in the future.

“What we are building now must be sustainable. When the time comes for us to go back to the capital market, we should be in a position to do so without difficulty,” he said.

He also warned against complacency, noting that improved economic conditions should not lead to excessive borrowing, as Ghana must guard against sliding back into difficult times.

In addition, the analyst pointed out that rising debt levels raise questions about medium-term sustainability, including concerns about debt servicing risks and the possibility of default.

“While we have not accumulated significant new debt, and therefore have not experienced an external shock, issues such as foreign exchange pressures must be addressed,” Mr. Okley added.

He noted that stabilising the exchange rate and strengthening fiscal discipline will be key to safeguarding Ghana’s economic recovery and preventing a relapse into debt distress.