Cedi depreciation hikes public debt by GHS 46bn to GHS 658bn
Ghana’s public debt surged by GH¢46.4 billion in the first two months of 2024, reaching a total of GH¢658.6 billion ($53.1 billion), according to the Bank of Ghana’s latest economic and financial data report.
This sharp increase elevates the nation’s debt-to-GDP ratio to 62.7%, up from GH¢611.2 billion at the close of 2023.
The escalation in the public debt stock was driven primarily by the depreciation of the cedi and a significant rise in government borrowing on the domestic market.
The central bank’s report details that the domestic debt increased by GH¢18.5 billion, while external debt surged by GH¢28.9 billion, largely attributable to the weakening cedi.
As of February 2024, the external component of the total public debt stood at $30.6 billion (GH¢350.3 billion), which represents 36.1% of GDP.
The domestic debt, on the other hand, was recorded at GH¢278.7 billion, accounting for another 36.1% of GDP.
Fiscal Performance and Debt Metrics
Despite the burgeoning debt levels, the government’s fiscal operations have remained on target.
The fiscal deficit-to-GDP ratio was 2.6% in the first quarter of 2024, an increase from 1.8% during the same period the previous year.
Meanwhile, the primary balance showed a deficit of 1.4% of GDP as of March 2024.
Debt Restructuring Efforts
In response to mounting economic challenges, Ghana suspended interest payments on external loans in December 2022.
The country has since received a Memorandum of Understanding from its bilateral creditors concerning the restructuring of part of its external debt.
Negotiations with bondholders are currently underway, following a successful agreement with bilateral creditors in January 2024. These restructuring efforts are critical as Ghana navigates its economic recovery amid persistent fiscal pressures.
The increase in Ghana’s public debt underscores the significant economic challenges facing the country, particularly those related to currency depreciation and the need for extensive domestic borrowing.
The outcome of ongoing debt restructuring negotiations will be pivotal in determining the country’s financial stability moving forward.
