Ghana faced a formidable challenge in 2022 as its public debt service burden devoured more than half of its domestic revenue, according to the Institute of Statistical, Social and Economic Research’s (ISSER) 2022 State of the Ghanaian Economy report, released on October 31.
The ISSER report, quoting alarming statistics, highlighted the dire situation: “High debt service, ¢0.56 of every ¢1 of domestic revenue.”
This unsettling revelation implies that a staggering 56% of domestic revenue was absorbed by the obligations of servicing the national debt in 2022.
Equally concerning is the revelation that external debt reached 55.3% of Ghana’s Gross Domestic Product (GDP) by the end of 2022, surpassing the level of domestic debt which stood at 44.7% of GDP.
This marked a significant shift from the status quo since 2019 when external debt last exceeded domestic debt.
The report succinctly notes the significance of this development: “1st since 2019 of higher external debt!”
Overall, the report exposes a worrisome increase in public debt as a percentage of GDP, which surged from 64.5% in 2021 to 70.7% in 2022.
This remarkable rise in external debt is attributed to a combination of factors, including the adverse effects of global financing conditions, a decline in investor confidence due to credit downgrades, a loss of access to International Capital Markets (ICM), substantial capital flow reversals, and challenges related to domestic financing.
In its conclusion, the report rings the alarm bell, warning that the elevated debt service burden, coupled with the surge in external debt exposure during 2022, has significantly increased the risk of debt distress for Ghana.
Quoting directly from the report, it states: “DSA [Debt Sustainability Analysis] shows a high risk of debt distress” and underscores that Ghana’s “solvency and liquidity worsened” during the year.
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