Ghana’s debt stood at GHS575.5 billion in June, representing 71.9 per cent of Gross Domestic Product (GDP) as of the first half of 2023,according to Bank of Ghana (BoG).
A summary of Economic and Financial Data of the Central Bank shows a GHS27.7bn increase, compared with the GHS547.8bn debt in January 2023, making it the highest since January 2023.
The external component of the debt was GHS315.8bn in January, representing 39.4 per cent of GDP, but reached GHS328.6bn in June, which is 41 per cent of GDP.
On the other hand, the domestic component of GHS232.0 in January, which is 29 per cent of GDP increased to GHS246.9bn in June, representing 30.8 per cent of GDP.
Ghana’s debt is increasing at a time when the Government is implementing a three-year US$3bn International Monetary Fund (IMF) loan-support programme, aimed at making the country’s debt sustainable.
“The recent increment in our debt stock is mainly as a result of the weak performance of the cedi against the dollar, Dr Daniel Anim Prempeh, Chief Economist, Policy Initiative for Economic Development (PIED), said.
“The high debt we’re incurring is because the cedi is not performing well, so, once you convert your debt to the prevailing dollar rate, you should expect increases in the value. Therefore, once the cedi depreciates, you expect the value of most of the dollar denominated debts to increase,” he explained.
The domestic debt has declined from the GHS247.9bn in April 2023 to GHS246.9bn in June because of the Domestic Debt Exchange Programme (DDEP), the Economist noted.
“We’re hoping that our external creditors will agree for the kind of restructuring that the Government wants to do, and if that’s done, there will be room for us to be able to sustain the high debt that we’re incurring,” Dr Anim-Prempeh said.
On the impact of the GHS600 million first tranche of the ongoing US$3bn IMF programme, received in May 2023, Dr Anim-Prempeh said its contribution to reducing the country’s debt was likely to reflect from end year.
“The impact of the IMF first tranche will not be immediate. It’s until the end of the fiscal year when the analysis is done before we’ll be able to see any significant impact that it might have had within the domestic economy,” he said.
He urged the Government to reduce its appetite for both domestic and external debt to balance the credibility and investor confidence associated with the implementation of the IMF programme.
He added that: “Even if all the US$3bn is released, it will not bring about any immediate growth and stability within the macroeconomic environment, it will take a certain time to actually feel the impact.”
Dr Anim-Prempeh urged government to “focus on policies that will bring about macroeconomic stability by being fiscally disciplined as we enter into an election year in 2024.”