Ghana’s fiscal landscape underwent a dramatic transformation in the first half of 2025, marked by a substantial GH¢139 billion reduction in its total public debt stock. This significant decrease, from GH¢752.1 billion in January to GH¢613.0 billion by June, signals a potential turning point in the country’s economic recovery. Several factors contributed to this positive development, including a more disciplined approach to debt management, relative stability in the exchange rate, nominal GDP growth, and a more cautious stance on domestic borrowing. These improvements have collectively fostered renewed investor confidence in Ghana’s economy, which had been grappling with fiscal distress in recent years. However, despite this encouraging progress, challenges persist, particularly with regards to the country’s external debt burden and its vulnerability to external shocks.
The substantial decline in Ghana’s debt stock can be attributed to a combination of strategic policy decisions and favorable economic conditions. The government’s commitment to a more disciplined fiscal trajectory, coupled with a period of relative exchange rate stability, played a crucial role in curbing the accumulation of debt. Nominal GDP growth further contributed to reducing the debt-to-GDP ratio, a key indicator of a country’s fiscal health. Moreover, a more cautious approach to domestic borrowing, aimed at reducing reliance on expensive local bond markets, helped to contain the growth of the domestic debt component. These measures collectively contributed to a more sustainable debt profile and signaled a commitment to fiscal responsibility, which in turn boosted investor confidence and paved the way for improved economic prospects.
While the overall debt picture improved significantly, Ghana’s external debt remains a cause for concern. At GH¢300.3 billion (US$29.1 billion) in June, the external debt represents a substantial portion of the total debt stock and continues to put pressure on the country’s foreign reserves. The increase in external debt, even if marginal, highlights the vulnerability of the Ghanaian economy to external factors such as currency depreciation and rising global interest rates. These vulnerabilities underscore the need for continued vigilance and proactive measures to mitigate external risks and strengthen the country’s resilience to global economic shocks.
On the domestic front, the public debt witnessed a modest decline, reaching GH¢312.7 billion in June, down from GH¢315.6 billion in May. This slight contraction suggests that the government’s efforts to consolidate its fiscal position and reduce dependence on domestic borrowing are yielding positive results. The lower domestic debt burden contributes to a more stable macroeconomic environment and reduces the pressure on domestic interest rates. This, in turn, creates space for private sector investment and contributes to overall economic growth. The decline in domestic debt, coupled with the significant reduction in the total debt stock, indicates a positive shift in Ghana’s fiscal outlook.
The combined effect of these positive developments resulted in a significant improvement in Ghana’s overall public debt-to-GDP ratio. The ratio held steady at 43.8% in June 2025, a marked decrease from 66.8% in the same period the previous year. This improvement reflects the positive impact of GDP rebasing, which provides a more accurate picture of the size of the economy, and the stabilizing macroeconomic environment fostered by the government’s fiscal consolidation efforts. A lower debt-to-GDP ratio enhances a country’s creditworthiness and reduces the risk of debt distress, making it more attractive to investors and creating a more stable foundation for sustainable economic growth.
Despite the positive momentum generated by the significant debt reduction, analysts caution that Ghana’s fiscal path remains fragile and susceptible to external shocks. The country’s continued reliance on external financing exposes it to the risks of currency depreciation and potential tightening of global credit conditions. A sudden reversal in these areas could quickly unravel the gains achieved so far. To maintain the positive trajectory and ensure the sustainability of the fiscal improvements, the government must maintain strict fiscal discipline, strengthen foreign reserve buffers, and actively explore more concessional financing options to manage its debt profile effectively and shield the economy from potential external shocks. A continued commitment to sound fiscal policies, coupled with proactive risk management strategies, will be crucial for consolidating the gains achieved and securing long-term economic stability.
