Ghana’s fiscal situation has come under intense scrutiny in recent years, with concerns raised over the country’s high levels of public debt and its ability to meet its financial obligations. The International Monetary Fund’s (IMF) Regional Outlook Report for April 2023 has revealed that Ghana spent around 45% of its revenue, excluding grants, on interest payments in 2022, the highest of any country in Sub-Saharan Africa. This is primarily due to the elevated public debt of the country, which was estimated to be around $44 billion as of November 2023.
The Ghanaian government has taken steps to address this issue, suspending interest payments on some external debts, and has initiated a debt restructuring program to help reduce interest payments and extend the maturity period of its debt. However, the success of this program will depend on the cooperation of its creditors, including bilateral, multilateral, and Euro bondholders. The outcome of these negotiations will have a significant impact on the country’s ability to manage its debt and meet its financial obligations in the future.
Meanwhile, Malawi and Zambia have placed second and third, respectively, in Africa in terms of the highest interest payments in 2022. Malawi was expected to have spent around 37% of its revenue, excluding grants, on interest payments, while Zambia was projected to have spent 31%. These figures highlight the growing debt burden faced by countries across the continent and the need for proactive measures to address this issue.
The IMF’s report also indicates that sub-Saharan Africa’s public debt ratio reached 56% of GDP in 2022, the highest level since the early 2000s. The COVID-19 pandemic has contributed to this increase, with wider fiscal deficits caused by overlapping crises, slower growth, and exchange rate depreciations. Furthermore, 19 of the region’s 35 low-income countries were already in debt distress or facing a high risk of debt distress in 2022, according to the IMF.
The Ghanaian government spent ¢33.61 billion on interest payments in 2021, with domestic interest payments accounting for 78.9% of the total interest payments. This highlights the impact of domestic debt on the country’s finances, with interest payments constituting about 50.4% of domestic revenue. These figures underline the challenges that Ghana and other countries in the region face in managing their debt and ensuring sustainable economic growth.
Ghana’s high levels of debt and interest payments pose significant challenges to the country’s economic stability and future growth prospects. The government’s efforts to address this issue through debt restructuring and negotiations with its creditors will be critical in ensuring the country’s financial sustainability. However, these efforts must be supported by wider regional and global initiatives to address the growing debt burden faced by countries across sub-Saharan Africa.