Ghana’s public debt stood at GH¢719.5 billion as of June 2026, equivalent to 45.0% of GDP. That is a staggering figure—roughly GH¢21,000 for every Ghanaian. But why does a country that collects taxes, earns oil revenue, and receives grants still need to borrow? The answer lies in a simple but uncomfortable arithmetic: the government spends more than it earns. Understanding why that gap exists—and what borrowing actually finances—explains a central challenge of Ghana’s public finances.
Quick Facts
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Total public debt: GH¢719.5 billion as of June 2026, or 45.0% of GDP
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Debt composition: Domestic debt accounts for 54.4% (GH¢391.12 billion); external debt accounts for 45.6% (GH¢328.40 billion)
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Interest burden: Interest payments are forecast to average a high 20% of government revenue over the next four years
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Debt anchor: The PFM Act requires a debt-to-GDP ratio of 45% by 2034
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2025 financing: Gross Financing Needs of GH¢337.3 billion, financed through domestic borrowing (GH¢298.1 billion), external borrowing (GH¢20.5 billion), and drawdown of government deposits (GH¢18.8 billion)
The Simple Reason: Spending Exceeds Revenue
The most basic explanation for government borrowing is that expenditure is higher than revenue. In the 2026 budget, the government plans to spend GH¢357.1 billion but expects to collect only GH¢268.1 billion in revenue and grants. The gap—roughly GH¢89 billion—must be financed through borrowing.
This gap is not accidental. It reflects deliberate policy choices about taxation, spending priorities, and the structure of the economy. Ghana’s tax-to-GDP ratio has historically been low compared to peer countries, meaning the government collects less revenue relative to the size of the economy than many comparable nations. The 2023 Medium-Term Revenue Strategy aims to address this by broadening the tax base and improving compliance, but progress takes time.
Meanwhile, spending pressures are constant. Public sector wages, debt interest, statutory transfers, and the cost of running ministries, departments and agencies consume the vast majority of revenue. A former Finance Minister noted that rigid items like wages, interest and statutory transfers consume more than two-thirds of total spending, leaving limited room for capital investment.
What Borrowing Actually Finances
When people hear “government borrowing,” they often imagine money being spent on new roads, schools or hospitals. In reality, a significant portion of borrowing goes toward servicing existing debt.
The government’s Gross Financing Needs for 2025 amounted to GH¢337.3 billion—equivalent to 23.5% of GDP. This figure includes both new borrowing to fund the budget deficit and the rollover of maturing debt. Of the total financing, domestic borrowing accounted for GH¢298.1 billion, external borrowing for GH¢20.5 billion, and a drawdown of government deposits for GH¢18.8 billion.
Maturing bills alone amounted to GH¢267.9 billion, with net issuance of GH¢30.1 billion to finance the budget. In other words, much of the borrowing is not new money for new spending—it is refinancing old debt that has come due.
The government has relied predominantly on short-term Treasury bills to meet its financing requirements. This approach reflected post-DDEP market constraints on issuing new bonds, as well as efforts to rationalise borrowing costs amid declining interest rates and improved domestic currency stability. However, the dominance of T-bill issuance has implications for the cost and risk profile of the debt portfolio, particularly the Average Time to Maturity (ATM), which declined from 4.8 years in 2024 to 4.1 years in 2025.
The Interest Burden: Borrowing to Pay Interest
Perhaps the most concerning feature of Ghana’s debt situation is the cost of servicing it.
Interest payments are forecast to average a high 20% of government revenue over the next four years. This is well below the historical peak of almost 48% in 2021, a reduction driven by debt restructuring, exchange rate appreciation, and lower local currency financing costs.
But 20% is still substantial. It means that for every cedi the government collects, twenty pesewas go toward paying interest on past borrowing. That is money that cannot be spent on education, healthcare, or infrastructure.
The weighted average interest rate on the total public debt portfolio stood at 8.1% at end-December 2025, up from 7.7% a year earlier. This increase was largely driven by a rise in the weighted average external interest rate, which increased from 1.8% to 3.3%, reflecting higher external interest payments resulting from the resumption of Eurobond debt service and exchange rate effects.
Domestically, the picture is more encouraging. The weighted average interest rate on domestic debt declined from 16.2% to 12.8%, consistent with easing headline inflation and improved domestic financing conditions. Interest rates on Ghana’s six-month treasury bills have fallen to about 6.5%, and one-year bills to 10.1%, from almost 30% at year-end 2024.
Why Not Just Stop Borrowing?
If borrowing is costly and burdensome, why not simply stop?
The answer is that sudden fiscal consolidation—cutting spending drastically or raising taxes sharply—can harm the economy and hurt ordinary citizens. The IMF has noted that Ghana’s large development and social needs require continued public investment, and that the fiscal path must balance debt sustainability with the need to fund priority spending.
The IMF’s assessment is that lowering the primary surplus to 0.5% of GDP from 2027 would remain consistent with safeguarding debt sustainability, provided that further progress is made in strengthening public financial management, including fiscal risk management, state-owned enterprise governance, and quasi-fiscal activities. This means Ghana can borrow to invest in development—but only if it also strengthens the institutions that manage public money.
The Debt Restructuring: What Changed
Ghana’s borrowing situation cannot be understood without reference to the debt restructuring that followed the 2022 crisis.
The government launched the Domestic Debt Exchange Programme (DDEP) in December 2022, swapping outstanding medium- and long-term domestic bonds for lower-coupon, longer-maturity bonds. The external debt restructuring was completed for Eurobonds in October 2024, and agreements with official creditors under the G20 Common Framework were reached in January 2025.
The results have been significant. The provisional public debt-to-GDP ratio for 2024 was 61.8%, reduced from 68.7% in 2023. By June 2026, the ratio had fallen further to 45.0%. Moody’s lifted Ghana’s sovereign rating to “B3” from “Caa1” in October 2026, citing lower borrowing costs and improved debt affordability.
But the restructuring also imposed costs. The Minority in Parliament noted that Ghana will pay GH¢111 billion over two years to service restructured debts—a figure they contrasted with the GH¢230 billion that would have been owed without the DDEP. The Bank of Ghana’s negative equity has reportedly increased, and the financial sector clean-up has weighed on government debt.
The Path Forward: Building Buffers and Reducing Risk
The government’s current borrowing strategy is not just about filling the budget gap. It is also about building buffers for future debt service obligations.
The Bank of Ghana reported that domestic debt increased significantly during the review period in line with the Government’s net domestic financing target and strategy to strengthen its capacity to meet upcoming debt service commitments. The increase was partly driven by the reopening of the bond market in March 2026 and tap issuances of medium and long-term debt instruments.
The government is also building a Sinking Fund to meet large debt service payments expected from maturing bonds in 2027 and 2028. This is a form of precautionary saving—setting aside money now to avoid a crisis later.
The IMF’s Policy Coordination Instrument, a non-financing arrangement agreed in 2026, focuses on sustaining growth-friendly fiscal adjustment, safeguarding debt sustainability, strengthening fiscal transparency and governance, and supporting economic diversification. The shift from crisis stabilization to consolidation reflects the improved debt trajectory, but the IMF warns that risks remain, notably from state-owned enterprises and ongoing quasi-fiscal activities.
What This Means for Ordinary Ghanaians
Government borrowing affects everyday life in ways that are not always obvious.
When the government borrows heavily from domestic sources, it competes with private businesses for limited credit. This can push up interest rates for everyone—making loans for small businesses, mortgages, and consumer credit more expensive.
When interest payments consume a large share of revenue, there is less money for public services. Schools, hospitals, roads, and social protection programmes all depend on the government’s fiscal space.
When the debt burden becomes unsustainable, as it did in 2022, the consequences are severe: currency depreciation, inflation, and painful austerity measures.
The current trajectory is improving. Debt-to-GDP has fallen, interest rates have declined, and the government has resumed issuing longer-term bonds. But the fundamental challenge remains: Ghana’s revenue base is not broad enough to fund its spending needs without borrowing. Until that changes, the debt conversation will continue.
Frequently Asked Questions
Why does the Ghanaian government borrow money?
The government borrows because its expenditure exceeds its revenue. The gap is financed through domestic and external borrowing. Borrowing also refinances maturing debt and builds buffers for future obligations.
How much does Ghana owe?
As of June 2026, Ghana’s total public debt stood at GH¢719.5 billion, equivalent to 45.0% of GDP. Domestic debt accounted for 54.4% and external debt for 45.6%.
What does the government spend borrowed money on?
A significant portion goes toward refinancing maturing debt and paying interest. Borrowing also finances the budget deficit, which covers public sector wages, goods and services, capital expenditure, and social programmes.
How much of government revenue goes to paying interest?
Interest payments are forecast to average a high 20% of government revenue over the next four years, down from a peak of almost 48% in 2021.
What was the Domestic Debt Exchange Programme?
The DDEP was launched in December 2022 to restructure Ghana’s domestic debt. It swapped outstanding medium- and long-term bonds for lower-coupon, longer-maturity bonds to reduce debt service costs.
Why did Ghana’s debt-to-GDP ratio improve?
The improvement was driven by debt restructuring, exchange rate appreciation, higher economic growth, and lower local currency financing costs.
What is the government’s debt target?
The Public Financial Management Act was amended to introduce a debt-to-GDP rule of 45% by 2034.
Is Ghana’s debt sustainable?
The IMF assesses Ghana’s debt as sustainable on a forward-looking basis, with the risk of debt distress expected to move from high to moderate in the medium term, provided reforms continue.
What to Remember
Ghana borrows because it spends more than it earns. That gap is financed through domestic and external borrowing, which also refinances maturing debt and builds buffers for future obligations.
The cost of that borrowing is significant. Interest payments average about 20% of government revenue, money that cannot be spent on development. The debt restructuring of 2022-2024 reduced the burden, and the debt-to-GDP ratio has fallen from over 60% to 45%.
But the fundamental challenge remains: until Ghana’s revenue base expands and its spending becomes more efficient, borrowing will remain a feature of the fiscal landscape. The path to sustainability requires not just debt restructuring, but stronger revenue mobilisation, disciplined expenditure, and robust public financial management.
For ordinary Ghanaians, the practical takeaway is that government borrowing is not abstract. It affects interest rates, public services, and the stability of the economy. Understanding why it happens—and what it costs—is part of understanding how Ghana’s public finances work.
Source: The Accra Daily Mail
Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of The Accra Daily Mail, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.
