Ghana’s public debt fell sharply by GH¢46.8 billion in October 2024, a significant decline that positions the total debt stock at GH¢761.0 billion.
The Bank of Ghana, in its latest Summary of Financial and Economic Data, noted that the reduction translates to 74.6% of the country’s Gross Domestic Product (GDP).
In dollar terms, the debt shrank by $4.2 billion to $27.9 billion during the same period, offering a much-needed breather for Ghana’s fiscal landscape.
The drop comes as part of broader efforts to stabilize the economy and reduce the nation’s financial vulnerabilities.
External debt drops, domestic debt climbs
The report highlights a considerable drop in external debt, which declined by GH¢52.6 billion between September and October 2024.
This reduction brought external debt to GH¢453.7 billion, equivalent to 44.5% of GDP.
Notably, external debt has consistently hovered around $30 billion since January 2024, reflecting stability in Ghana’s foreign borrowing profile.
However, the domestic debt rose to GH¢307.3 billion, making up 30.1% of GDP. Persistent borrowing on the treasury market has been the driving factor behind the increase.
Back in February 2024, domestic debt stood at GH¢275.8 billion, signaling a steady upward trend as the government leans on local financing to bridge budget gaps.
Improved fiscal management
Despite the challenges posed by rising domestic debt, the government’s fiscal operations appear to be on track.
By July 2024, the deficit-to-GDP ratio stood at 3.9%, suggesting an improved capacity to manage public finances.
However, the primary balance remained in deficit at 1.8% of GDP as of March 2024, underscoring the ongoing need for fiscal discipline.
Ghana’s economy was valued at GH¢1.020 trillion by the end of October 2024, an encouraging signal of resilience in the face of global and domestic economic pressures.
Positive business and consumer sentiments
The Bank of Ghana’s October 2024 confidence surveys revealed optimism across the board.
While consumer confidence remained steady, business confidence showed marked improvement as firms met their short-term targets and expressed positive expectations for industry performance.
This sentiment aligns with the Purchasing Managers’ Index (PMI), which rose to 50.6 in October, up from 49.1 in September.
A PMI reading above 50 indicates an expansion in business activity, reinforcing the narrative of a recovering economy.
Economic activity shows sustained growth
High-frequency indicators point to a sustained pick-up in economic activity during the third quarter of 2024.
The real Composite Index of Economic Activity (CIEA), a key measure of economic performance, recorded annual growth of 2.2% in September 2024.
This is a significant turnaround from the 0.4% contraction observed during the same period in 2023.
Several factors have driven this improvement, including increased activity at Ghana’s ports, higher consumption of goods and services by households and firms, a boom in construction projects, expanded credit to the private sector, and a rise in tourist arrivals.
Path to economic stability
The latest debt reduction and indicators of improved economic activity suggest Ghana is on a gradual path to economic recovery.
However, rising domestic debt highlights the need for continued fiscal discipline and diversification of financing sources.
As Ghana moves forward, sustaining these gains will depend on strategic economic management, efforts to boost investor confidence, and policies aimed at fostering long-term growth.
The nation’s resilience amid challenges is a promising sign of its ability to navigate economic turbulence effectively.
