Public debt increases by GHS 6.3bn in Q2 2023, now GHS 575.5bn representing 71.9% of GDP
In the recent release of the September 2023 Summary of Economic and Financial Data, the Bank of Ghana has revealed that Ghana’s public debt witnessed a notable uptick, surging by approximately ¢6.3 billion during the second quarter of 2023. This substantial increase propelled the nation’s total debt to ¢575.5 billion, which translates to some $52.3 billion. Strikingly, this figure represents a significant 71.9% of Ghana’s Gross Domestic Product (GDP).
This surge in public debt can largely be attributed to the modest depreciation of the Ghanaian cedi against the US dollar during the aforementioned period. Notably, this escalation in the debt burden underscores the economic challenges faced by the nation, necessitating a meticulous examination of its fiscal policies and strategies.
A Volatile Trajectory: Unpacking Ghana’s Debt Dynamics
Per the September 2023 Summary of Economic and Financial Data, Ghana’s debt stock stood at ¢473.2 billion in December 2022, comprising approximately 77.5% of the nation’s GDP. Subsequently, the debt levels witnessed successive increments, reaching ¢547.8 billion ($50.7 billion) at the close of January 2023, and further ascending to ¢564.1 billion ($51.2 billion) and ¢569.5 billion ($51.7 billion) in February and March 2023, respectively.
In April 2023, a slight downturn in debt levels was observed, with the total debt falling to ¢569.2 billion ($51.9 billion). However, this dip was short-lived, as the debt burden rebounded, soaring to ¢573.5 billion ($52.2 billion) in May 2023 and eventually settling at ¢575.5 billion ($52.3 billion) in June 2023.
These fluctuations in debt levels raise pertinent questions about Ghana’s fiscal management and sustainability, prompting both domestic and international stakeholders to closely monitor the economic landscape.
External vs. Domestic Debt Composition
Breaking down the components of Ghana’s public debt, data from the Central Bank discloses that the external component reached $29.9 billion (¢328.6 billion) in June 2023, surpassing the figure recorded in April 2023, which stood at $29.3 billion (¢321.3 billion).
In contrast, the domestic debt stood at ¢246.9 billion at the close of June 2023, constituting approximately 30.8% of the nation’s GDP. This figure, albeit relatively stable, calls for prudent debt management strategies as Ghana navigates its fiscal landscape.
Fiscal Deficit Improvement and Debt Restructuring Initiatives
Despite the challenges posed by mounting debt, Ghana has made strides in its fiscal deficit management. The government’s fiscal deficit to GDP ratio improved to 1.3% in June 2023, a significant shift from the 8.3% recorded in December 2022. Moreover, the primary balance reflected a surplus of 0.6% of GDP in June 2023, indicative of concerted efforts to stabilize the nation’s fiscal position.
It is noteworthy that Ghana suspended payment of loans to its external creditors in December 2022 amidst economic turmoil. Subsequently, the country embarked on the restructuring of some domestic debt, commencing in February 2023 through the Domestic Debt Exchange Programme. This program is expected to conclude soon, aiming to alleviate the nation’s debt burden.
Ghana is also engaged in negotiations with its external creditors, with an anticipated agreement by the year’s end to restructure its external debt. These efforts underscore Ghana’s commitment to restoring fiscal stability and ensuring sustainable economic growth.
