Cedi depreciation adds GH₵101bn to public debt in 6 months

The sharp depreciation of the Cedi has significantly impacted Ghana’s public debt, adding a staggering GH₵101 billion by the end of June 2024.
This depreciation has driven the external debt up by 28.7%, from GH₵350.9 billion to GH₵451.9 billion.
In addition to the external debt surge, domestic debt also grew by 12.7%, rising from GH₵257.3 billion to GH₵289.9 billion, due to continuous disbursements from creditors.

GH₵133.6bn added to public debt in 6 months
The combined effects of the Cedi’s depreciation and creditor disbursements have increased the total public debt by GH₵133.6 billion in six months.

GH₵741.95bn total public debt t June 2024
As of the end of June 2024, Ghana’s total public debt stood at GH₵741.95 billion, marking a 22% increase from GH₵608.4 billion at the end of December 2023.

Public debt to GDP declines slightly
Despite the rising debt, the ratio of gross public debt to Gross Domestic Product (GDP) decreased slightly from 72.3% in June 2023 to 70.6% of GDP by mid-2024.
This improved debt position is largely attributed to $2.8 billion in debt relief from bilateral and multilateral creditors, and $4.7 billion in debt cancellation from Eurobond holders, achieved through external debt restructuring under the International Monetary Fund (IMF) programme.
While this restructuring is expected to slow the pace of debt accumulation and curb the rise in Ghana’s debt-to-GDP ratio, the resumption of debt service commitments post-IMF presents risks to Ghana’s target of achieving a debt-to-GDP ratio of 55% by 2028.
To reach this target, it is crucial for Ghana to allocate increasing portions of additional loans to productive, self-financing capital expenditures that can expand the economy and generate the necessary inflows to pay down these loans over time.
The depreciation of the cedi against the US dollar improved from 54% in November 2022 to 27.8% in December 2023, compared to 30.0% in December 2022.
The year-to-date depreciation of the cedi moderated to 7.7% in the first quarter of 2024, compared to 22.1% in the same period in 2023.
The cedi cumulatively depreciated by 18.6% against the US dollar at the end of June 2024, compared to 22% in the same period in 2023.
The cedi cumulatively depreciated against the dollar by 21.5% as of August 26, 2024, compared to 22.1% recorded in the same period in 2023.
The cedi’s depreciation is, however, easing as the month-on-month depreciation against the dollar improved significantly from 6.1% in May 2024 to 3.1% in June 2024, and further improved to 2.1% in July 2024. The cedi’s relative stability is largely due to tight monetary policy by the Bank of Ghana (BoG), strong fiscal consolidation, intensification of the gold-for-oil programme, the BoG’s gold-for-reserves program, the deployment of a centralized platform for Foreign Exchange Bureaus by the BoG and the implementation of the dynamic Cash Reserve Ratio (CRR) to absorb excess liquidity.
Others measures are revised regulations on advanced payments for imports, and positive market sentiments resulting from the disbursement of the third tranche of the IMF Extended Credit Facility and the agreement in principle with external creditors.
It is envisaged that the following expected inflows and signals will also help to improve the supply of Forex and/or exchange rate stability going forward: an expected $360 million after Ghana successfully concludes the upcoming 3rd Review of the IMF program; an expected $300 million after the World Bank DPO2 is approved; and the successful completion of the external debt restructuring.