By The Institute of Economic Affairs (IEA) has raised concerns about the government’s aggressive borrowing on the domestic debt market, particularly at the short end where investor demand is high.
In its July-August 2024 Economic Outlook, the IEA noted a significant increase in domestic debt, rising by GH¢32.7 billion or 12.7%, from GH¢257.3 billion to GH¢290.0 billion in the year up to June 2024. In contrast, external debt has only slightly increased by US$0.9 billion or 0.3%, from US$30.1 billion to US$31.0 billion.
The IEA acknowledged that the government’s current inability to access the international bond market has led to its reliance on domestic borrowing.
The IEA has advised that borrowing should be carefully monitored and controlled to prevent it from escalating into a major debt crisis.
As of June 2024, Ghana’s public debt reached GH¢742.0 billion, marking a year-to-date increase of GH¢133.6 billion or 22.0%.
In dollar terms, the debt amounted to US$50.9 billion, down from US$52.2 billion at the end of December 2023. This decrease is attributed to the sharp rise in the cedi/dollar exchange rate affecting the domestic debt component.
In terms of Gross Domestic Product, the debt represented 70.6% at the end of June 2024, compared to 72.3% at the end of December 2023, reflecting a higher nominal GDP in 2024.
Under the Economic Credit Facility (ECF) program, the public debt is projected to reach 82.5% of GDP in 2024, according to the IMF Executive Board’s Second Review of Ghana’s ECF on June 28, 2024.
The IEA finds this projection unexpectedly high, given that the planned debt restructuring and fiscal consolidation under the ECF are intended to reduce the debt to a sustainable level of approximately 56% by 2028.
“It is not clear whether this sustainable target is still attainable”, it concluded.
