The rising public debt is partly driven by the persistent budget deficits forcing the government to resort to increasing volumes of domestic and external borrowing. Government revenue has systematically failed to keep pace with expenditures, resulting in steady fiscal deficits.

Following 2016, when expenditures exceeded projections by 3.9 percent of GDP, government expenditures have consistently remained below targets, which is usually the case for non-election years.

Revenue outturns, however, have not kept pace with targets. An exception was 2020, when revenue as a percent of GDP exceeded the target by 0.5 percent.

The persistent fiscal deficits resulting from government revenue shortfalls have led to years of debt accumulation and rising debt servicing costs. The HIPC and the MDRI programs enabled the government of Ghana to reduce the country's debt stock from 2000 to 2006.

The overall debt reduction from the HIPC initiative and MDRI were US$3.7 billion and US$3.5 billion, respectively (Ministry of Finance). This freed up resources to support economic programs to facilitate poverty reduction and stimulate growth through increased investment and employment creation.

However, the borrowing and fiscal space created by the debt relief package from the HIPC and MDRI programs have also been exploited vigorously by the government, leading to a rapid increase in the public debt.

Ghana’s total debt

As of December 2021, Ghana's total public debt has risen sharply to US$58.6 billion (or GHc351.8 billion), representing 76.6 percent of GDP.

This may be compared with the US$50.8 billion (or GHc291.6 billion, representing 76.1 percent of GDP) recorded a year earlier (Ministry of Finance).

By the end of the first quarter of 2022, Ghana’s total public debt stock is US$55.1 billion (or GHc391.9 billion), representing 78 percent of GDP (Bank of Ghana).

The alarming increase in the public debt is a source of concern to investors, development partners, and the Ghanaian population. Currently, Ghana ranks among the top 10 countries in SSA with the highest debt to GDP ratios and the debt to GDP is projected to reach 85 percent by 2023.

It is important to note that Ghana’s debt to GDP in 2021 is relatively high compared to the average reported for middle-income countries (59.1 percent), the SSA region (56.9 percent), and the ECOWAS region (47.2 percent).

The public debt stock recorded an annual growth rate of approximately 15 percent in 2021, down from 29 percent a year earlier (Figure 7). The rate of debt accumulation for 2021 was 18 percent, down from 34 percent in 2020 (Ministry of Finance, 2022).

The rate of debt accumulation in 2019 and 2018 was 26.1 percent and 21.4 percent, respectively.

The financial sector bailout and energy sector bailout have contributed significantly to the annual increases in debt accumulation since 2018.

Excluding the financial sector bailout, the Ministry of Finance reports that the rate of debt accumulation, was 14.5 percent, 15.8 percent, and 22.4 percent in 2018, 2019, and 2020, respectively.

External Debt: trends, composition, drivers of acceleration

Following the debt relief package from the HIPC and MDRI programs, the share of external debt in the total public debt declined to 41 percent in 2006. Since 2008, the share of external debt in total public debt has fluctuated between 48 percent and 60 percent, reaching 60 percent in 2015 and dipping to 48 percent in 2021.

By December 2021, external debt was US$28.3 billion (or GHc170 billion), an increase from the US$24.7 billion (or GHc141.8 billion) recorded at the end of 2020. External debt inched up to US$28.4 billion (or GHc201.9 billion) in March 2022.

The middle-income status attained by Ghana in 2010 has since reduced Ghana's access to concessional loans, and as a result, Ghana has had to diversify away from traditional creditors.

Ghana's diversification of its financing sources away from the traditional creditors, including multilateral and bilateral creditors, toward commercial creditors, explains the increase in the share of external debt in the total public debt,

From 2007 to 2020, Ghana raised a total of US$12.5 billion (or US$13 billion in 2019 constant dollar terms) from international capital markets (Table A5 in the Appendix). As of December 2020, US$10.3 billion of this debt remains outstanding (Figure 9). By December 2021, the debt stock from the international capital market had reached US$13.1 billion.

The combined outstanding loans to multilateral and bilateral creditors were approximately US$9.5 billion in 2021.

In percentage terms, multilateral creditors' share of total external debt has declined from 61 percent in 2007 to 29 percent in 2021 (Figure 10). Similarly, bilateral creditors' share of total external debt steadily declined from 39 percent in 2011 to 5 percent in 2021.

Loans from international capital market

Loans from the international capital market have gradually increased from 8 percent in 2012 to 46 percent in 2021.

Noticeably, the share of commercial creditors, which peaked at 18 percent in 2015, has returned to its 2019 level of 10 percent by 2021.

Roughly 70 percent of the total external debt is denominated in US dollars and about 17.3 percent in Euros (Table 6). The Chinese Yuan (CNY), British Pound Sterling (GBP), and Japanese Yen (JPY) accounted for 3.8 percent, 2.2 percent, and 2.0 percent of the Total External Debt denominations, respectively.