Public debt declines, but domestic debt rises
Ghana’s total public debt dropped by GH¢24.1 billion month-on-month to GH¢761.0 billion as of November 2024, according to the Bank of Ghana’s January 2025 Summary of Financial and Economic Data.
The decline was primarily attributed to external debt restructuring initiatives aimed at reducing the country’s unsustainable debt burden.
In dollar terms, Ghana’s total debt stood at $47.9 billion in November 2024, down from $51.6 billion during the same period in 2023. The debt-to-GDP ratio was estimated at 72.2%, reflecting a slight improvement from previous years but still indicative of significant fiscal challenges.
External Debt Restructuring and Its Impact
The external debt component fell to $27.6 billion in November 2024, compared to $30 billion a year earlier. This marks a continued reduction following the September and October 2024 figures, which both stood at $32.0 billion. The ongoing external debt restructuring, initiated under the International Monetary Fund’s (IMF) Extended Credit Facility program, has been a key factor in trimming the external debt.
This restructuring includes efforts to renegotiate repayment terms with international creditors, aiming to stabilize Ghana’s economy and restore debt sustainability. The government’s successful buyback of a portion of its Eurobonds and the deferment of interest payments have also contributed to the reduction.
Domestic Debt Rises Amid Borrowing
While external debt declined, domestic debt surged to GH¢311.7 billion in November 2024, representing 30.5% of GDP. This marks a significant rise from the GH¢275.8 billion recorded in February 2024. Persistent borrowing on the domestic treasury market, driven by the government’s fiscal needs, has fueled the increase.
Ghana’s Domestic Debt Exchange Programme (DDEP), launched in 2023, restructured over GH¢137 billion of domestic bonds to reduce interest payment obligations and extend maturities. While this provided temporary relief, continued borrowing has offset some of the gains. Analysts warn that rising domestic debt could crowd out private sector investment and strain the financial sector.
Fiscal Operations and Economic Performance
The Central Bank’s data on government fiscal operations for the latter part of 2024 was unavailable. However, as of July 2024, the budget deficit stood at 3.9% of GDP, while the primary balance showed a deficit of 1.8% of GDP.
Ghana’s nominal GDP reached GH¢1.020 trillion in November 2024, reflecting steady economic growth despite fiscal pressures. The government’s focus on fiscal consolidation and structural reforms, including improvements in tax collection and expenditure rationalization, remains critical to achieving debt sustainability.
Ghana’s Debt History and Challenges
Ghana’s debt trajectory has been a growing concern over the years. By the end of 2022, public debt reached 85.5% of GDP, prompting the government to negotiate a $3 billion IMF bailout. The crisis was exacerbated by unsustainable borrowing, high-interest costs, and global economic shocks, including the COVID-19 pandemic and the Russia-Ukraine conflict.
The domestic debt exchange programme was a cornerstone of Ghana’s strategy to tackle the crisis. Though it faced resistance from bondholders and financial institutions, the program helped avert a complete fiscal collapse. However, the country’s return to treasury market borrowing highlights the difficulty of maintaining discipline amid fiscal constraints.
Outlook
While the external debt restructuring offers a glimmer of hope, rising domestic debt and fiscal imbalances remain pressing concerns. The government’s ability to sustain reforms, enhance revenue mobilization, and manage expenditure will be crucial in steering the economy toward recovery. Economists caution that maintaining transparency and accountability in debt management will be critical to regaining public trust and ensuring long-term fiscal stability.
