Ghana’s public debt increased by GH¢46.4 billion in the first two months of 2024 to hit GH¢658.6 billion ($53.1 billion), data from the Bank of Ghana has revealed.
The country’s debt ended 2023 at GH¢611.2 billion but shot up to GH¢626.0 billion in January 2024 and subsequently to GH¢658.6 billion in February 2024.
The country’s total public debt is equivalent to 62.7% of its Gross Domestic Product (GDP).
According to the central bank’s May 2024 Summary of Economic and Financial Data, the surge in public debt stock was due to the depreciation of the cedi and increased government borrowing on the domestic market.
While the domestic debt increased by GH¢18.5 billion in the first two months of 2024, the external debt increased by GH¢28.9 billion, largely due to the cedi depreciation.
The central bank’s data revealed that the external component of the total public debt stood at $30.6 billion (¢350.3 billion) in February 2024, representing 36.1% of GDP.
The domestic debt stood at GH¢278.7 billion in February 2024, about 36.1% of GDP.
The report also revealed that the government’s fiscal operations were on target. The deficit-to-GDP stood at 2.6% in the first quarter of 2024, compared to 1.8% during the same period last year.
The primary balance was also a deficit of 1.4% of GDP in March 2024.
Ghana suspended interest payments on loans to its external creditors in December 2022 following economic challenges.
The country has received a Memorandum of Understanding from its bilateral creditors regarding the restructuring of a component of the external debt.
It is currently negotiating a deal with the bondholders after successfully negotiating a deal with the bilateral creditors in January 2024.
Background
Data from the Bank of Ghana indicated a growing disparity between the nation’s public debt before and after the agreement on the $3 billion Extended Credit Facility from the IMF.
According to the Bank of Ghana’s March 2024 Summary of Economic and Financial data, debt accumulated from May 2023 (start of the IMF programme) to April 2024 amounted to GH¢ 30.5 billion (local currency); bringing the total public debt stock from GH¢ 579 billion to GH¢ 610 billion.
The report also indicated that this debt accumulated due to the depreciation of the cedi.
In as much as Ghana’s debt was increasing in terms of the cedi, it has decreased by about USD4 million in dollar terms.
There is a broader perspective to this if we are to go deeper in to why Ghana went to the IMF.
In 2022, Ghana encountered a significant economic crisis driven by internal vulnerabilities and external shocks.
Before COVID-19, Ghana’s loose fiscal policy relied heavily on expensive borrowing, compounded by challenges in the energy and financial sectors. The pandemic and global events exacerbated these issues, the culmination of tightening financial conditions, rapid escalation of debt levels, soaring inflation rates, substantial depreciation of the exchange rate, and the depletion of foreign reserves precipitated a full-fledged macro-financial crisis causing Ghana to lose access to international bond markets and leading to capital outflows.