Ghana’s debt deal stabilizes economy, but not living costs

On the last Friday of August, hundreds gathered at Accra’s Black Star Square for a rally demanding debt cancellation. The event, organized by civil society and trade unions across Africa, capped a three-day conference in Ghana — which has been struggling with debt after defaulting in 2022. Ghana’s debt ballooned due to heavy borrowing from foreign and domestic markets. Since then, the country has undergone a G20 Common Framework restructuring, which the government approved in June. Since the restructuring, the government has kept up with its repayments, and the country’s currency has somewhat stabilized; however, living costs remain high. Civil society groups are also calling for greater accountability. Ghana has been subject to International Monetary Fund reform programs 18 times since it gained independence, said Abdulkarim Mohamed, a coordinator at the Economic Governance Platform, a coalition of civil society organizations championing prudent management of public funds, adding that the IMF needs to reassess its programs as they seem not to work. “We don’t want the same old prescription that focuses mainly on macroeconomic indicators, that does not translate into citizens’ welfare, does not translate into employment, or anything that citizens can point to as benefiting them directly at the micro level,” he said. Ghana is also pushing for reforms to global debt rules. In May, President John Mahama was among just two African leaders to attend the African Union Conference on Debt, which sought to establish a common continental position on debt. Restructuring and reforms In June, the Ghanaian Parliament approved a $2.8 billion debt restructuring deal with 25 creditors, allowing for rescheduling of repayments. As part of the restructuring process, the Ghanaian government has had to undertake reforms toward debt sustainability. Its debt as a share of gross domestic product as of June this year was at 43.8%, down from 61.8% according to audit firm KPMG. KPMG attributes the progress to Ghana’s successful implementation of reforms thus far as part of the IMF-supported Post-COVID-19 Programme for Economic Growth. The program is supported by the IMF through its Extended Credit Facility and is pegged on reforms in areas such as tax policy, revenue administration, and public finance management, in addition to addressing weaknesses in the energy and cocoa sectors. The IMF has so far undertaken four successful reviews of the program, with two more to go in the three-year-long program. According to Yaa Asantewa Asante, the director of public debt management in Ghana’s Ministry of Finance, the government has introduced a number of significant reforms to restore debt sustainability. These include the amendment of the Public Finance Management — or PFM — Act that sets a debt ceiling of 45% of GDP by 2034. “This is even beyond the IMF’s 55% target by 2028,” she said. Additionally, through new rules, the government has subjected spending to additional authorization and approvals in what is referred to as commitment authorization, with a new division in the Ministry of Finance to address compliance. The government also suspended new commercial borrowing and instead focused more on concessional sources and domestic revenue mobilization. “And then there is also the imposition of disbursement limits on bilateral and multilateral loans, because these disbursements have direct impact on the deficit at any point in time,” Asante said. Ghana has also set up a Cedi sinking fund account and a dollar sinking fund account, in line with the requirements of the PFM Act. The sinking fund — established to hold funds to pay debts when they are due — “proactively smoothens debt amortization,” Asante said. “This will specifically target the redemption of the debt service funds that we have in 2027 and 2028.” The human cost Despite these reforms, professor Godfred Bokpin of the University of Ghana, who also spoke at the conference last month, said he hasn’t seen much progress. “Beyond the regional and the global [reforms], at the national level, we should be looking at strengthening governance and accountability, so that whatever debt we acquire, we also put them to judicious use. It’s not a substitute. We cannot continue to look at it from outside alone,” he said. Bokpin said that between 2000 and 2006, Ghana received over $4 billion in debt relief from the Heavily Indebted Poor Countries Initiative and the multilateral debt relief initiative, but despite that support found itself in debt distress once again. “A couple of decades down the line, we are here. They should work at being accountable and ensuring that there is spending efficiency in how the government allocates resources. Without that, we will end up in this situation,” he said. “Some of the adverse effects of this debt crisis is that people have been forced into poverty and hardship.” --— Kingsley Amoah, official, Defence Network for Democracy In his address to Parliament in June this year, Ghana’s finance minister, Cassiel Forson, reported that inflation in the country had decreased to 13.7% from 23.8% in December 2024. According to a Ghana Statistical Services report, the year-on-year inflation rate in July 2025 was 12.1% meaning the price of goods and services “increased by 12.1% between July 2024 and July 2025.” While it is a relief that inflation is reducing, consumers have yet to see a significant impact on the cost of living. Klenam Dziewornu, an economics student at the University of Ghana, said he now spends more on food items. “A crate of egg was going somewhere 32 cedis in 2022. Currently, a crate of egg is going for 70 cedis. When we convert it at the current rate in dollar terms, it will go somewhere around 7 USD per crate,” he said. As a student, he knows of many young people who completed university and have no access to jobs. He said that there is a massive unemployment crisis due to the debt crisis. “Nurses who graduated from school and are still at home. Then there is the National Service, which we do in Ghana after University. Once you’re done with this compulsory serving, you stay in your house. There’s no employment for you,” he said. According to Ghana Statistical Services, the country saw a rise in youth unemployment in the last two quarters of 2024, reaching 25.8% in the age 15 to 24 category, up from 17.6% in the second quarter. Kingsley Amoah, an official of Defence Network for Democracy, a civil society organization in Ghana, agrees. “Some of the adverse effects of this debt crisis is that people have been forced into poverty and hardship. People cannot even pay for health insurance,” he said. Also impacted by the crisis are pensioners since the government instituted a pension restructuring as part of the Domestic Debt Exchange Programme, or DDEP, to delay disbursements of matured pension payments. According to the Economic Governance Platform, a CSO in Ghana, before the DDEP, many government bonds carried interest rates between 15% to 21% per annum but the new bonds issued under the exchange however had initial interest rates as low as 0% in 2023, gradually rising to only 10% in subsequent years, with final maturities extending up to 15 years. “If you are not spending appropriately … to add value to our population … there is no way we’ll be able to make the much-needed progress. Poverty will continue to be our portion.” --— Godfred Bokpin, professor, University of Ghana In 2021, the country had 225,000 pensioners and 1.9 million contributors to the pension scheme. The pensioners depend on the pension payments to fund their retirement, but Bokpin said the pensioners’ payments aren’t up to date. Due to the debt crisis, the government missed payment of matured coupons to pensioners, leading to protests in 2023. Planned protests by the pensioners in 2024 were halted following an amicable resolution by the government. Mohamed believes that while the civil society has to continue to keep the government in check and push for transparency and accountability on debt issues, it also needs to engage directly with lenders in order to avoid debt crises. “Yes, the politicians claim to be representing us, but we have seen so many times that whatever they pursue does not adhere to our benefits. So, we need a seat at the table,” he said. Bokpin said Ghanaians and Africans in general will stand to benefit if the global financial architecture is reformed and debt is addressed. He said that the proportion of debt servicing to the country’s total revenue leaves nothing for development spending. “And if you are not spending appropriately in the area of infrastructure, or education to add value to our population and benefit from the population demographics, and spend appropriately on health, and spend also on social protection, there is no way we’ll be able to make the much-needed progress,” he said. “Poverty will continue to be our portion, inequality will continue to divide us.”