By Samuel LARTEY(Prof)
Ghana’s economic story continues to evolve, with the country’s public debt profile taking a significant step forward.
The Bank of Ghana’s January 2025 Summary of Financial and Economic Data reveals that Ghana’s total public debt fell by GH¢24.1 billion month-on-month to GH¢736.0 billion in November 2024, thanks largely to external debt restructuring.
This development reflects a turning point for Ghana’s fiscal health, as the country works to regain stability in the face of recent economic challenges.
In dollar terms, Ghana’s total debt dropped to US$47.9 billion as of November 2024, down from US$51.6 billion during the same period in 2023.
While the debt-to-GDP ratio stands at 72.2%, a marked improvement from previous years, it still underscores the need for continued fiscal discipline. But how does this progress impact the broader Ghanaian ecosystem, including government initiatives, corporations, entrepreneurs, and the everyday citizen?
Government Initiatives: Reclaiming Fiscal Space
For the government, the reduction in debt offers breathing room to pursue critical initiatives. With debt servicing obligations alleviated, Ghana can redirect resources toward key development projects. For example:
- Education and Healthcare:
By trimming external debt, the government can expand programs such as the Free Senior High School initiative and strengthen healthcare facilities under the Ghana Health Service.
- Infrastructure Development:
The decline in debt allows for more investment in critical infrastructure, such as roads, railways, and energy projects. Projects like the Tema-Mpakadan Railway Line, which enhances trade and transportation within the West African sub-region, stand to benefit.
- Social Safety Nets:
Programs like the Livelihood Empowerment Against Poverty (LEAP) can be bolstered to reduce poverty and inequality. However, challenges remain. The 2025 budget is still constrained by the high cost of public sector wages, energy subsidies, and financing requirements for local governments.
To sustain these gains, the government must implement robust revenue-collection measures, such as improving tax compliance and reducing illicit financial flows.
Corporations and Large Businesses:
A Potential Economic Resurgence
Corporations and large businesses in Ghana are also poised to benefit from this development. Lower external debt signals improving macroeconomic stability, which can lead to:
- Increased Foreign Direct Investment (FDI):
With reduced risk perceptions, Ghana may attract more investors to sectors like oil and gas, agriculture, and renewable energy. The $2.5 billion solar project announced in 2024 could expand further, providing energy security and employment opportunities.
- Ease of Borrowing:
Lower public debt could translate into reduced government borrowing from domestic banks, freeing up capital for businesses to access at lower interest rates.
- Export Growth:
Initiatives like the African Continental Free Trade Area (AfCFTA) offer new markets for Ghanaian goods, including cocoa, gold, and textiles. Companies in export-oriented sectors can leverage these opportunities with the support of reduced macroeconomic pressures.
However, the road ahead is not without hurdles. Inflation, which stood at 40.1% in October 2023, continues to affect production costs. Businesses must innovate and invest in cost-saving technologies to remain competitive.
Entrepreneurs: New Opportunities Amid Stability
Entrepreneurs form the backbone of Ghana’s economy, and the debt reduction offers a more stable environment for growth. Key benefits include:
- Access to Capital:
With improved investor confidence, financial institutions are likely to increase lending to small and medium-sized enterprises (SMEs), which represent over 80% of Ghanaian businesses.
- Expansion in Green Energy and Tech:
Entrepreneurs in agritech and renewable energy, like those producing solar panels locally, can capitalize on government incentives. Ghana’s high solar irradiation makes it a prime candidate for solar power expansion.
- Export Potential:
Entrepreneurs can tap into AfCFTA markets with government-backed export development programs.
However, entrepreneurs still face challenges such as high utility costs and limited access to affordable raw materials. Addressing these issues will require targeted interventions from both the government and private sector stakeholders.
Citizenry: Hope for Better Living Standards
For the average Ghanaian, the reduction in public debt represents a glimmer of hope in difficult times. The improvement in the fiscal space could lead to:
- Reduced Cost of Living:
If inflation is brought under control, citizens may experience lower prices for goods and services.
- Job Creation:
Investments in infrastructure, energy, and export-oriented industries can create jobs and reduce unemployment, which stood at an estimated 13.4% in 2023.
- Improved Social Services:
Citizens can expect better access to education, healthcare, and social support programs as the government reallocates resources.
However, many Ghanaians remain skeptical. Past debt reductions have not always translated into tangible benefits. Effective implementation of reforms and transparent communication will be critical to rebuilding trust.
Lessons from Debt Restructuring
Ghana’s debt restructuring draws parallels with countries like Zambia, which recently secured a deal with creditors to restructure $6.3 billion of its external debt. Zambia used the freed-up resources to invest in agriculture and infrastructure, providing a model for Ghana to emulate. Similarly, Rwanda, with a debt-to-GDP ratio of 69.8%, has focused on export diversification and technology-driven sectors to drive growth.
Conclusion: Toward a Sustainable Future
Ghana’s falling public debt marks a critical step toward economic recovery. For the government, it provides an opportunity to reinvest in critical sectors, while businesses and entrepreneurs can leverage a more stable macroeconomic environment to drive innovation and growth. For citizens, the prospect of improved living standards brings hope for a better future.
However, achieving lasting change will require continued fiscal discipline, structural reforms, and a commitment to inclusive growth. Ghana stands at a crossroads, with the potential to transform its debt relief into a sustainable development trajectory. The question remains: Will this momentum be sustained, or will it falter under the weight of old challenges?
As 2025 unfolds, the answer lies in how Ghana’s leaders, businesses, and citizens harness this opportunity to rebuild and reimagine the country’s future.
