Ghana’s Economy Struggles Under Mounting Debt Crisis

Ghana‘s public debt reached worrying levels in 2024, exposing the country’s growing fiscal vulnerabilities amidst stagnant economic growth. According to data from the Bank of Ghana, total public debt peaked at GH₵782.9 billion in the second quarter of 2024, before slightly easing to GH₵736.9 billion by December.

This brought the debt-to-GDP ratio to 72.2% in Q4 2024, a slight improvement from the 79.2% peak earlier in the year, but still significantly above sustainable thresholds.

Despite these figures, Ghana’s annual nominal GDP remained unchanged at GH₵1,020.2 billion throughout 2024, signaling a stagnant economy. The lack of GDP growth amplifies the burden of the country’s rising debt levels, as there is no accompanying economic expansion to reduce the debt ratio or create room for additional borrowing.

External debt constituted the largest share of the total debt, peaking at GH₵506.3 billion in Q2 2024 before declining to GH₵425.3 billion by Q4 2024. At its height, external debt accounted for 50.6% of GDP, raising concerns about Ghana’s vulnerability to foreign exchange risks and external shocks.

Meanwhile, domestic debt grew steadily throughout the year, increasing from GH₵250.7 billion in Q3 2023 to GH₵311.7 billion by Q4 2024. This rise indicates a reliance on local borrowing to fund fiscal operations, but it also raises questions about crowding out private sector investment, as government borrowing could limit credit availability for businesses.

The stagnant GDP suggests that Ghana’s debt trajectory is unsustainable in the absence of growth. With no significant expansion in the economy, the debt-to-GDP ratio remains alarmingly high, leaving the country with limited fiscal space for essential investments or crisis interventions.

The implications of this stagnation are far-reaching. Rising debt levels without corresponding growth increase the cost of servicing loans, potentially diverting funds from critical sectors like healthcare, education, and infrastructure.

The slight reduction in total debt in the latter half of 2024 reflects some effort to stabilize the situation. However, these efforts must be paired with policies to stimulate economic growth, diversify revenue streams, and attract investments.

Experts suggest that improving domestic revenue mobilization, enhancing public sector efficiency, and investing in growth-oriented sectors could provide a way out of the current fiscal tightrope.