Fiscal Discipline Drive Decline in Debt-to-GDP Ratio

Economic Analyst Emmanuel Boateng emphasized that Ghana’s decline in its debt-to-GDP ratio to 45.3 percent has largely been driven by a mix of exchange rate gains, fiscal discipline, and stronger nominal GDP growth, rather than debt reduction alone.

Speaking on the Market Trends Segment of the Business Breakfast on ZED 101.9FM, Mr. Boateng explained that the ratio, which previously stood at over 60 percent, has improved significantly on paper due to both policy-driven and cyclical economic factors.

He noted that a key driver has been the appreciation of the cedi, which has reduced the local currency value of external debt and automatically lowered the overall debt ratio.

“The strengthening of the cedi reduces the local currency value of external debt, which lowers the debt ratio automatically. So part of the improvement is not entirely because we are paying down debt, but because the currency has appreciated,” he explained.

He also pointed to fiscal discipline and improved debt management as important contributors, including reduced borrowing and higher primary surpluses, which have helped slow the accumulation of new debt.

According to him, growth in nominal GDP has further supported the decline by expanding the size of the economy relative to total debt stock.

While acknowledging these gains, Mr. Boateng stressed that the improvement is a combination of real progress and valuation effects linked to currency movements.

“There are genuine improvements as well, including lower borrowing, higher primary surpluses, and effective debt management. These contribute to a real debt reduction, and that is key for us,” he said.

He cautioned that part of the decline remains cyclical and dependent on exchange rate performance, adding that the durability of the gains will hinge on sustained macroeconomic stability and continued fiscal discipline.

The analyst also cautioned government against placing the burden of fiscal adjustment on public sector workers, describing their earnings as already too low to sustain further cuts.

Mr. Boateng urged policymakers to take a closer look at the real value of public sector salaries, particularly when converted into foreign currency.

“If you convert the salaries of our public sector workers into dollars, you will realise that a lot of them earn just a few hundred dollars a month. It is very meagre,” he said.

According to him, the conversation around managing government expenditure, especially under ongoing economic reforms, should not come at the expense of workers’ livelihoods.

He questioned the rationale behind reducing or suppressing wages while pursuing infrastructure development.

“Are we going to sacrifice citizens’ income just to build roads, or are we going to explore other options?” he asked.

Mr. Boateng pointed to revenue mobilisation as a more sustainable solution, arguing that government must focus on closing loopholes in the tax system and improving collection mechanisms.

“You know where the gaps are. Reach those areas and get more revenue. Pay workers well and still carry out development. Government must not take the easy way out by cutting wages instead of fixing revenue challenges,” he stressed.

He further noted that Ghana remains among the least paying countries in terms of public sector compensation, a situation he described as worrying.

Mr. Boateng warned that any further reduction in earnings could worsen living conditions and trigger discontent.