Ghana’s public debt trajectory experienced a significant setback in July 2025, with the total debt stock surging by GH¢15.8 billion to reach GH¢628.8 billion, equivalent to $59.9 billion and representing 44.9% of the country’s Gross Domestic Product (GDP). This sharp increase followed a period of relative stability in the preceding three months, during which the debt stock had witnessed declines primarily attributed to the appreciation of the Ghanaian cedi against major international currencies. The July surge underscores the inherent vulnerability of Ghana’s debt profile, which remains highly susceptible to fluctuations in the exchange rate and external economic shocks. The resurgence of the debt burden highlights the ongoing challenges in managing the nation’s fiscal position and raises concerns about the sustainability of its debt levels.
The volatility of Ghana’s debt stock is evident in the significant shifts observed over recent months. While the debt had fallen from GH¢769.4 billion in March to GH¢613 billion in June, largely due to the cedi’s strengthening, the July figures demonstrate a reversal of this trend. The rapid escalation in debt underscores the delicate balance between exchange rate movements and debt sustainability, emphasizing the need for robust fiscal management and policies to mitigate the impact of external factors on Ghana’s economic stability. The recent increase suggests that the earlier gains from currency appreciation were temporary and that underlying structural issues continue to exert pressure on the country’s debt dynamics.
A deeper examination of the debt composition reveals that the increase was primarily driven by a surge in domestic borrowing. Domestic debt climbed to GH¢323.7 billion in July, equivalent to 23.1% of GDP, marking a substantial increase from GH¢312.7 billion in June. Meanwhile, external debt remained relatively stable at $29 billion, which translates to 21.8% of GDP. This reliance on domestic borrowing raises concerns about potential crowding-out effects on private sector investment, as government borrowing competes with the private sector for available funds. The increasing domestic debt burden also poses a risk to the stability of the domestic financial market, as it can lead to higher interest rates and potentially create inflationary pressures.
The Bank of Ghana’s fiscal data for July 2025 further illuminates the challenges confronting the Ghanaian economy. The reported budget deficit-to-GDP ratio of 1.4% indicates the government’s continued struggle to balance its revenues and expenditures. While the primary balance, which excludes interest payments, registered a surplus of 0.7% of GDP, the overall budget deficit underscores the significant burden of interest payments on existing debt. This persistent deficit, coupled with the rising debt stock, further contributes to the vulnerability of Ghana’s fiscal position and necessitates measures to enhance revenue generation and control expenditure growth.
The confluence of rising debt levels, a reliance on domestic borrowing, and a persistent budget deficit paints a concerning picture of Ghana’s fiscal health. The data suggests that despite the short-term respite provided by the cedi’s earlier appreciation, the underlying fiscal pressures remain significant. The heavy reliance on domestic borrowing not only exposes the economy to the risks associated with crowding out private investment but also raises concerns about the sustainability of the domestic debt market. The continued budget deficit, albeit moderated, indicates the need for sustained fiscal consolidation efforts to ensure long-term stability and debt sustainability.
The July 2025 data serves as a stark reminder of the fragility of Ghana’s debt trajectory and the importance of implementing prudent fiscal policies. The sharp rise in debt, driven primarily by domestic borrowing, highlights the limitations of relying on short-term exchange rate gains to address underlying structural issues. The persistent budget deficit, coupled with the increasing debt burden, necessitates a comprehensive approach to fiscal management that focuses on enhancing revenue mobilization, prioritizing expenditure efficiency, and implementing structural reforms to strengthen the overall resilience of the Ghanaian economy. The ongoing vulnerability to external shocks and exchange rate fluctuations underscores the urgency of implementing these measures to ensure the long-term sustainability of Ghana’s debt and fiscal position.
