Can Ghana Weather the Debt Storm?
In the heart of Washington D.C., at the 2025 IMF and World Bank Spring Meetings, Ghana’s Finance Minister, Dr. Cassiel Ato Forson, stepped forward with a mission: to save Ghana from a looming economic catastrophe. Armed with a bold debt strategy, Dr. Forson has sent a clear message: Ghana is fighting for its economic survival.
Ghana’s Fragile Recovery: Progress Amid Danger
After enduring an economic crisis in 2022, when inflation peaked at 54%, Ghana has made some progress. Inflation eased to 22.4% by March 2025, the cedi stabilized, and interest rates declined slightly, aided by tighter monetary policy and more cautious borrowing strategies. Yet, beneath these improvements, the country faces a ticking debt time bomb. Without urgent intervention, Ghana risks undoing its fragile recovery.
The Debt Overhang: A Looming Catastrophe
Ghana’s debt challenges are staggering:
– GHS 150.3 billion in domestic debt service, with heavy repayments due between 2027 and 2028.
– $8.7 billion in external debt obligations due between 2025 and 2028.
– GHS 67.5 billion in government arrears, choking businesses and public investments.
– $1.73 billion owed to Independent Power Producers risking power cuts (dumsor).
– GHS 32 billion in cocoa sector arrears, threatening critical agricultural exports.
– GHS 10.45 billion in lingering banking sector cleanup costs.
Without decisive action, these overlapping debts could trigger another economic crisis, derailing Ghana’s hard-won stability.
Dr. Cassiel Ato Forson’s Four-Pronged Attack on Debt:
At the Spring Meetings, Dr. Forson outlined an aggressive strategy built around four pillars:
- Audit and Accountability
A full forensic audit of government debts is already underway, aiming to eliminate ghost payments and inflated contracts. Procurement laws will also be amended to require Finance Ministry clearance for major government spending, restoring discipline at the point of origin.
- Legal Reforms for Fiscal Discipline
Ghana plans to enshrine a debt-to-GDP cap of 45% by 2035 and mandate a 1.5% primary surplus each year. Critically, an Independent Fiscal Council shielded from political interference will oversee fiscal discipline. No more passing deficit targets without consequences; no more unchecked election-year spending.
- Real-Time Enforcement
The Finance Ministry is establishing a Compliance Desk to monitor spending monthly. A Public Financial Management (PFM) Compliance League Table will rank government ministries by their financial discipline, exposing reckless spenders to public and investor scrutiny.
- Fast-Tracked Structural Reforms
Ghana is accelerating tax reforms to plug loopholes, restructuring energy sector debts to prevent blackouts, rescuing the cocoa sector, and tightening financial sector rules. Real-time budget tracking has also been introduced to curb waste before it happens.
Will the Anchor Hold?
Ghana’s reform history is riddled with broken promises. The Fiscal Responsibility Act (2018) aimed to cap deficits at 5% of GDP but was ignored in the 2020 election year when spending exploded. The Public Financial Management Act (2016) created oversight structures that were politically compromised and underfunded. COVID-19’s fiscal shock shattered even well-intentioned rules, forcing Ghana into emergency borrowing and soaring debt levels.
Government ministries also operated in silos, bypassing centralized financial systems and undermining fiscal control, while reforms like the Ghana Beyond Aid Charter remained largely rhetorical, as external borrowing rose after its launch. Past failures were driven by election-year spending sprees, weak enforcement, external shocks, and reforms seen mainly as donor-pleasing gestures rather than deep national commitments.
Why Dr. Cassiel Ato Forson’s Approach May Succeed
This time, there are reasons for cautious optimism:
- Forson’s fiscal rules will be legally binding, with real penalties for breaches. The new Independent Fiscal Council will remove enforcement from the direct control of politicians. Public naming and shaming through league tables will introduce reputational risks for reckless ministries.
- Real-time monitoring will catch fiscal slippages early. Crucially, Ghana’s reforms are being tied closely to IMF programs, ensuring external pressure and technical support.
- Forson is also being pragmatic, setting realistic targets, such as the 45% debt-to-GDP cap by 2035, instead of grand but unattainable promises.
Conclusion
Ghana stands at a critical crossroads. The global financing environment is tightening, and internal political pressures will mount as elections approach.
But the time for half-measures is over. If Ghana enforces these reforms ruthlessly and resists old temptations, the country could transform this looming crisis into a historic turnaround.
Ghana must act boldly, stay disciplined, and hold the line. Failure is not an option; the future of the economy and the fortunes of millions hang in the balance.
