Adnan Adams Mohammed
Despite major success with its debt restructuring efforts, Ghana is still rated as a ‘high debt distressed” nation, according to the updated 2024 Debt Sustainability Analysis (DSA).
The updated DSA is in line with the revised medium-term fiscal framework of the 2025 medium term budget framework and the third IMF Review macro-framework.
The updated DSA assessed Ghana’s public debt distress in light of the macro-fiscal developments and agreements with the Official (bilateral and multilateral) Creditors and Eurobond holders. In evaluating the solvency and liquidity status of the public debt portfolio, the DSA considered current and future debt service obligations on Ghana’s debt dynamics over the medium to long-term.
“Mr Speaker, the DSA assessment classified Ghana’s external and public debt risk rating as ‘high risk’ of debt distress”, Dr Casiel Ato Forson told parliament last week when presenting the 2025 budget.
“The Present Value (PV) of the total debt-to-GDP ratio and the external debt service-to-revenue ratio remain elevated above DSA thresholds in the near-term but are expected to be within the landing zone by 2028.”
Provisional data indicates that, Ghana’s gross central government and guaranteed debt as at end December 2024 stood at GH¢726.7 billion (US$49.4 billion) up from GH¢610 billion (US$52.4 billion) in 2023, representing, 61.8% of GDP in 2024 compared to 68.7% of GDP in 2023.
“This reduction in debt-to-GDP ratio and the dollar component of our debt stock is as a result of the outcome of the Eurobond debt restructuring”, the Minister noted.
The total public debt stock comprises external debt of GH¢416.8 billion (US$28.3 billion) and domestic debt of GH¢309.8 billion (US$21.1 billion). The external debt accounts for 57.4% of the total public debt stock, while domestic debt accounts for 42.6%. In terms of GDP, the external and the domestic debts account for 35.4% and 26.3%, respectively.
Meanwhile, the government’s Medium-Term Debt Management Strategy (MTDS) for the period 2024-2027 as captured in the budget statement was developed in fulfilment of section 59 of the PFM Act.
The MTDS for 2024 focused on the appropriate financing mix to mitigate costs and risks in the debt portfolio and sought to continue the government’s debt operations programme to promote debt sustainability while meeting financing needs.
The strategy proposed issuances of treasury bills and re-opening of bonds on the domestic market to finance the 2024 Budget. It also proposed building cash buffers for debt and cash management purposes from domestic sources. The strategy further proposed external financing under the IMF-ECF programme and the World Bank DPO to support the 2024 Budget implementation.
In line with the strategy, the government raised a total of GH¢41.5 billion (net issuance in government securities), 3.2% more than the revised net domestic financing target of GH¢40.2 billion. The additional borrowing was used to build buffers for debt operations. Government also received US$960.0 million from the IMF and US$300.0 million from the World Bank to support the implementation of the 2024 Budget.
“Mr Speaker, as part of efforts to bring the debt levels to a sustainable path, a debt limit of US$231.5 million in present value terms was placed on non-concessional external
borrowing. At end-December 2024, total new non-concessional debt of US$35.2 million in present value terms was contracted”, Dr Ato Forson noted.
He further recounted that, “market conditions in 2024 adversely affected the cost and risk indicators of the public debt portfolio, particularly refinancing and interest rates risks of domestic debt. The weighted average interest rate for domestic debt increased from 13.7% (2023) to 16.2% (2024). The domestic debt portfolio showed Average Time to Maturity (ATM) of 4.8 years (2024) from 6.1 years (2023), under the refinancing risk. In terms of maturity profile, 38.0% of domestic debt will be maturing in 2025, which is explained by the high proportion of T-Bills issued during the year. This resulted in higher domestic short-term financing and posed a high refinancing risk on the debt portfolio.”
Consequently, “following the restructuring of the Eurobonds, the weighted average interest rate reduced to 3.4% in 2024 from 5.3% in 2023. Also, about 85.4% of the debt portfolio is at a fixed interest rate compared to 92.1% in 2023”, he added.
