Ghana’s Debt Crossroads: Managing Risk, Restoring Confidence and Securing Sustainable Growth

By Prof. Samuel Lartey

Introduction

Public debt is more than a balance sheet item. It influences economic stability, investor confidence, the cost of borrowing, employment opportunities and the quality of life experienced by households. Every cedi borrowed today represents both an opportunity to finance development and a responsibility to repay tomorrow.

Ghana’s latest debt profile, published in the Bank of Ghana’s Monetary Policy Report as of the end of February 2026, presents an economy that has made measurable progress in stabilising its external debt structure while simultaneously confronting significant domestic financing risks. The report reveals that multilateral institutions now account for the largest share of Ghana’s external debt at 42.4 per cent. Meanwhile, the country continues negotiations with bilateral and commercial creditors, and although the successful Eurobond debt service payment in December 2025 strengthened international confidence, the growing dominance of short-term domestic debt has emerged as a significant concern because of its potential to increase rollover and refinancing risks.

This evolving debt landscape offers both encouragement and caution. Ghana has moved away from the uncertainty that characterised the debt crisis of 2022 and 2023, yet the journey towards long-term debt sustainability remains unfinished.

Understanding Ghana’s Current Debt Landscape

Debt, when prudently managed, enables governments to finance infrastructure, healthcare, education, agriculture and industrial development. Problems arise when borrowing becomes expensive, short-term, or poorly invested.

According to the Bank of Ghana Monetary Policy Report released in 2026, Ghana’s external debt composition demonstrates an important shift.

Table 1: Composition of Ghana’s External Debt at the End of February 2026

Creditor Category

Share of External Debt

Assessment

Multilateral institutions

42.4%

Largest component and generally concessional

International capital market

Relatively stable

Supported by successful Eurobond payment in December 2025

Bilateral creditors

Relatively stable

Restructuring negotiations continue

Commercial creditors

Relatively stable

Debt restructuring discussions ongoing

The increasing proportion of multilateral debt is generally viewed positively because loans from institutions such as the International Monetary Fund, World Bank and the African Development Bank Group usually attract lower interest rates, longer repayment periods and more favourable financing conditions.

Unlike commercial borrowing, multilateral lending is designed to support sustainable economic reforms while reducing repayment pressures.

Why Multilateral Debt Has Become More Dominant

Several important developments explain why multilateral creditors now account for the largest share of Ghana’s external debt.

1. IMF-Supported Economic Recovery

Since entering the IMF Extended Credit Facility Programme in May 2023, Ghana has prioritised concessional financing over expensive commercial borrowing.

The programme has strengthened macroeconomic stability through fiscal discipline, inflation management and structural reforms.

2. Reduced Access to International Capital Markets

Following the sovereign debt crisis, Ghana temporarily lost affordable access to international bond markets.

This naturally increased reliance on development finance institutions.

3. Debt Restructuring Strategy

Ongoing negotiations with bilateral and commercial creditors have slowed new borrowing from these sources while multilateral financing continued to support government programmes.

4. Lower Borrowing Costs

Multilateral loans generally provide lower interest rates than commercial borrowing, thereby reducing long-term debt servicing costs.

The Eurobond Payment That Strengthened Confidence

One of the positive developments highlighted by the Bank of Ghana is the relatively stable share of international capital market debt following the successful payment of Eurobond principal and coupon obligations in December 2025.

Although Ghana remains engaged in debt restructuring efforts, honouring agreed obligations sends several positive signals.

            •           It strengthens Ghana’s international financial credibility.

            •           It reassures existing investors.

            •           It improves future access to global capital markets.

            •           It demonstrates commitment to responsible debt management.

Investor confidence remains one of the most valuable assets any economy can possess because confidence influences exchange rates, foreign investment and economic growth.

The Bigger Concern Lies at Home

While external debt appears increasingly manageable, domestic debt presents a growing challenge.

The Bank of Ghana notes that short term instruments dominate Ghana’s domestic debt profile.

This creates two important risks.

1. Rollover Risk

Government must frequently refinance maturing debt.

If investors refuse to purchase new Treasury securities, the government may experience liquidity pressures.

2. Refinancing Risk

Should interest rates rise before refinancing occurs, government borrowing costs increase significantly.

Higher refinancing costs reduce resources available for development expenditure.

Countries with excessive short-term borrowing often become vulnerable during periods of financial uncertainty because large volumes of debt mature within relatively short periods.

Why Short-Term Debt Is More Expensive

Short-term borrowing appears attractive because it may initially carry lower nominal interest rates.

However, repeated refinancing can ultimately become more expensive than long-term borrowing.

For example, borrowing for three months and renewing that debt continuously over five years exposes the government to changing market interest rates every quarter.

By contrast, issuing longer maturity bonds locks in financing over several years.

This provides greater budget certainty.

How Debt Influences Ordinary Ghanaians

Government debt affects every household, whether directly or indirectly.

When debt servicing consumes large portions of national revenue, fewer resources remain available for public services.

Households may experience the consequences through:

            •           Higher taxes.

            •           Reduced public investment.

            •           Higher borrowing costs.

            •           Slower job creation.

            •           Increased inflationary pressures.

            •           Currency instability.

Conversely, responsible debt management creates fiscal space for investments in schools, hospitals, roads and digital infrastructure.

Implications for Businesses

Corporate Ghana closely monitors public debt because government borrowing influences financial markets.

When government competes aggressively for domestic funds, private businesses often struggle to obtain affordable credit.

The consequences include:

            •           Higher commercial lending rates.

            •           Reduced business expansion.

            •           Lower private sector investment.

            •           Delayed industrial growth.

            •           Reduced employment creation.

Small and medium-sized enterprises remain particularly vulnerable because they depend heavily on domestic bank financing.

What This Means for Investors

International investors assess three major indicators before committing capital.

            •           Debt sustainability.

            •           Fiscal discipline.

            •           Political and economic stability.

Ghana’s improved external debt structure and continued IMF programme implementation have enhanced investor sentiment.

However, persistent domestic refinancing risks continue to attract careful scrutiny.

Credit rating agencies closely observe debt maturity profiles because refinancing challenges may weaken sovereign credit quality.

Lessons from Other Emerging Economies

Several emerging economies have successfully reduced refinancing risks by extending debt maturities.

Countries such as Indonesia and Uruguay lengthened the average maturity of government debt while diversifying funding sources. These strategies reduced exposure to short-term market volatility and strengthened fiscal resilience.

Their experience illustrates that prudent debt management is not solely about reducing debt levels. It is equally about improving the quality, maturity and affordability of borrowing.

The Way Forward for Ghana

Ghana’s next phase of debt management should prioritise long-term sustainability rather than short-term financing convenience.

Key policy priorities include:

            •           Gradually extending the maturity profile of domestic debt.

            •           Deepening the domestic capital market to attract long-term investors.

            •           Expanding pension and insurance participation in government securities.

            •           Accelerating fiscal consolidation through stronger domestic revenue mobilisation.

            •           Improving expenditure efficiency by reducing waste and leakages.

            •           Increasing investment in productive sectors capable of generating export earnings.

            •           Supporting industrialisation to reduce import dependence.

            •           Strengthening public financial management and debt transparency.

            •           Enhancing private sector competitiveness to broaden the national tax base.

            •           Continuing structural reforms that improve investor confidence.

The Role of Citizens

Debt sustainability is not solely the responsibility of government.

Citizens contribute through:

            •           Paying taxes honestly.

            •           Supporting formal economic activities.

            •           Demanding transparency and accountability.

            •           Encouraging prudent use of public resources.

            •           Supporting productive entrepreneurship.

Strong public institutions and responsible citizenship reinforce each other in building sustainable national finances.

Conclusion

Ghana’s latest debt profile presents a balanced narrative of progress and caution. The increasing dominance of multilateral financing, accounting for 42.4 per cent of external debt by the end of February 2026, reflects improved access to concessional funding and greater confidence among development partners. The successful Eurobond payment in December 2025 further demonstrated Ghana’s commitment to meeting its financial obligations and helped stabilise international market perceptions.

At the same time, the Bank of Ghana’s warning about the growing concentration of short term domestic debt deserves urgent attention. Excessive reliance on short maturity instruments increases rollover and refinancing risks that could undermine fiscal stability if left unaddressed.

The true measure of successful debt management is not simply the amount a nation owes, but its ability to borrow wisely, invest productively and repay sustainably without compromising future prosperity. Ghana now stands at a pivotal moment where disciplined fiscal management, strategic borrowing and sustained structural reforms can transform debt from a source of vulnerability into a catalyst for inclusive growth. If government, businesses and citizens work together to strengthen economic resilience, today’s borrowing can become tomorrow’s foundation for lasting national development.