- Interest Costs to Consume 20% of Ghana’s Revenue Despite Debt Restructuring Gains — S&P
Ghana’s debt restructuring has sharply reduced the government’s interest burden, but servicing public debt is still expected to absorb an average of 20% of state revenue over the next four years, underlining how little fiscal room the country has regained after its sovereign default.
S&P Global Ratings said the projected ratio was significantly below the levels recorded during Ghana’s debt crisis, when interest payments consumed almost 48% of government revenue in 2021.
The decline reflects the combined effects of the domestic and external debt restructurings, the cedi’s appreciation in 2025 and the sharp fall in inflation and local interest rates.
But the remaining burden is still substantial. For every GH¢5 collected by the government, roughly GH¢1 could be used to pay interest before spending on wages, infrastructure, healthcare, education or social protection is considered.
That makes the improvement less a return to fiscal comfort than a retreat from an unsustainable extreme.
S&P described the expected interest-to-revenue ratio as “high”, even after acknowledging the progress made since the debt crisis. The assessment illustrates the central challenge confronting Ghana’s post-restructuring economy: debt relief has reduced immediate pressure, but it has not eliminated the structural weaknesses that allowed the debt stock to become unmanageable.
The government must consequently convert temporary financing relief into stronger revenue mobilisation, disciplined expenditure and sustained economic growth. Without those improvements, the benefits of restructuring could gradually be eroded by new borrowing, currency depreciation and higher refinancing costs.
The fall in domestic interest rates is one of the most significant sources of fiscal relief.
Yields on Ghana’s six-month Treasury bill have declined to about 6.5%, while the one-year bill is yielding approximately 10.1%. Both instruments were priced at close to 30% at the end of 2024.
This compression substantially reduces the cost of rolling over the government’s short-term domestic debt.
It also reflects the dramatic improvement in inflation, which fell from an annual average of 31% between 2022 and 2024 to 3.2% in March 2026. Inflation has since increased modestly to 5% in August, but remains far below the levels recorded during the crisis.
The lower rates offer the Treasury an opportunity to improve the maturity structure of domestic debt. Ghana relied heavily on short-term borrowing after the domestic debt exchange, partly because investor confidence in longer-dated government securities had weakened.
The Ministry of Finance imposed a three-year restriction on the issuance of new medium- and long-term domestic bonds following the December 2022 restructuring. The government resumed longer-tenor issuance in 2026.
S&P said this “should help lengthen the maturity profile of Ghana’s local currency debt”, reducing the frequency with which the government must return to the market to refinance maturing obligations.
However, extending maturities will require more than issuing longer-dated securities. Investors must be convinced that inflation will remain contained, fiscal targets will be respected and the government will not return to the borrowing practices that preceded the restructuring.
Ghana’s improved debt position has also benefited from the cedi’s appreciation in 2025. A stronger currency reduces the domestic value of foreign-currency debt and lowers the amount of cedi revenue required to meet external obligations.
That benefit is now being tested.
The cedi has weakened by 9.2% since the beginning of 2026, according to S&P. Although the currency remains about 43% stronger than its weakest level — GH¢16.47 to the dollar in November 2024 — its renewed depreciation demonstrates how quickly part of the fiscal improvement could be reversed.
A sustained decline in the currency would increase the cedi value of external debt, raise the cost of imported goods and potentially push inflation and domestic interest rates higher.
The danger is that these pressures could reinforce each other. Currency depreciation can increase inflation, higher inflation can force interest rates upwards, and rising rates can raise the cost of refinancing government debt.
This is why the interest burden cannot be assessed independently of Ghana’s foreign-exchange reserves, export earnings and balance of payments. The government may be paying less on domestic borrowing, but the durability of that advantage depends partly on whether the Bank of Ghana can preserve currency stability without exhausting its reserves.
S&P warned that conflict in the Middle East could erode some of Ghana’s progress by increasing inflation, financing costs and pressure on the cedi.
The risk is particularly important for an economy that exports crude oil but remains heavily dependent on imported refined petroleum products. Higher international oil prices can increase the country’s fuel import bill, intensify demand for foreign exchange and raise transport and production costs across the economy.
These pressures could complicate the Bank of Ghana’s monetary policy decisions. Although inflation remains low, renewed currency weakness and higher energy prices may limit the central bank’s ability to reduce interest rates aggressively.
For the government, the central question is whether the present reduction in debt-service costs represents the beginning of a durable fiscal transformation or merely a temporary dividend from restructuring.
The fall from a peak interest burden of nearly 48% of revenue to a projected average of 20% is material. It gives the government more room to fund essential services and rebuild public investment.
But allocating one-fifth of revenue to interest payments remains a heavy constraint for a country with significant infrastructure, healthcare, education and employment needs.
Ghana has escaped the most acute phase of its debt crisis. It has not yet escaped the consequences. The next four years will test whether the government uses the space created by restructuring to rebuild fiscal resilience — or allows lower borrowing costs to become the foundation of another debt cycle.
