Deloitte has projected that Ghana is likely to miss its 55% Debt-to-Gross Domestic Product (GDP) target by 2028, citing the resumption of debt service payments as a significant risk.
Ghana’s programme with the International Monetary Fund (IMF), which began in 2023, is set to end in 2026, with a key objective of reducing the country’s unsustainable debt levels from a Debt-to-GDP ratio of about 104% in 2022 to 55% by 2028. However, Deloitte’s forecast suggests that this target may be difficult to achieve.
Despite Ghana’s external debt restructuring, which has resulted in $4.4 billion in debt relief and $4.7 billion in debt cancellation over the course of the IMF programme, Deloitte in its 2024 Mid-Year Budget Review, noted that the country will still face challenges in controlling its debt levels. The firm notes that the debt restructuring will slow the pace of debt accumulation, but the resumption of debt service payments presents a significant risk to reaching the 55% Debt-to-GDP target by 2028.
Ghana is expected to make between $600 million to $800 million in debt service payments by the end of this year. As of June 2024, Ghana’s total public debt stood at GH¢741.95 billion, representing a 22% increase from GH¢608.4 billion at the end of December 2023. During the same period, the ratio of gross public debt to GDP decreased slightly from 72.3% in June 2023 to 70.6% by June 2024. The rise in debt levels was driven by a 12.7% increase in domestic debt, from GH¢257.3 billion to GH¢289.9 billion, and a 28.7% increase in external debt, from GH¢350.9 billion to GH¢451.9 billion, largely due to the sharp depreciation of the Ghanaian cedi.
Deloitte noted that achieving the 55% Debt-to-GDP ratio by 2028 would require Ghana to implement significant fiscal reforms, achieve strong and sustained economic growth, and manage its debt effectively. While the target is not impossible to reach, Deloitte emphasized that it would be an ambitious goal requiring substantial changes in policy, strong political will, and a favourable global economic environment.
The professional service firm argues that the best way to manage the country’s debt will be through efficient use of the borrowed funds “Given that the debt will most likely continue to increase over time, the most feasible option for achieving the optimal debt to GDP ratio is to direct increasing portions of additional loans into productive and self-financing capital expenditure to expand the economy whilst generating inflows to pay down these loans,” the report noted. However, given the current challenges, Deloitte argues that it is unlikely that Ghana can meet this target without substantial international support and comprehensive internal economic reforms.
