Finance Minister refutes claims of debt-to-GDP improvement under the previous government

Finance Minister Dr Cassiel Ato Forson has dismissed claims that Ghana’s improvement in its debt-to-GDP ratio is as a result of effective economic management by the previous government under Nana Addo Danquah Akufo-Addo.

Dr Forson clarified that the reduction in the debt-to-GDP ratio is largely due to the government’s decision last year to implement a 37 per cent principal haircut for euro bondholders. 

He explained that if the original bond value was ₵10 billion, this amount was effectively reduced to ₵3.7 billion, significantly lowering the country’s debt burden.

In addition, the accrued interest on these bonds, which was also subject to a 37 per cent reduction, was wiped out, further contributing to the decrease in the debt-to-GDP ratio. 

Dr Forson emphasized that, despite these measures, there is no cause for celebration, as they were “just haircuts given to some citizens.”

The Finance Minister was responding to questions regarding the decrease in Ghana’s debt-to-GDP ratio and how it aligns with his claims of inheriting a struggling economy from the previous administration. He made these remarks during an interview on The Point of View with Bernard Avle on Channel One TV on Wednesday, March 12, 2025.

“So, first of all, the debt to GDP has only come down not because of the work or something that NPP has done.  Or the previous administration did,” he said.

“The debt to GDP has dropped because last year the government gave bondholders, euro bondholders, 37 per cent principal haircut. So the euro bond at the time, if it was ₵10 billion, ₵3.7 billion were wiped out. Completely wiped out last year and the interest that had accumulated over the period, another 37 per cent were also wiped out and so, I don’t know whether they are celebrating the haircut they gave to some citizens,” he stressed.

“And remember, this haircut will not be given to foreigners. There are certain domestic banks that invested heavily in Ghana’s euro bond. There are certain Ghanaian individuals who, through their sweat, had accumulated so much resources and decided to invest in the Ghanaian economy. Instead of the government producing expenditure, the government gave them unparceled by burden. These individuals were invested into the economy and so they decided to reduce their investment by 37 per cent,” he explained further.

Dr Forson also clarified that this haircut will not apply to foreign bondholders, noting that some domestic banks had invested heavily in Ghana’s euro bonds.

“There are certain Ghanaian individuals who, through their sweat, had accumulated so much resources and decided to invest in the Ghanaian economy. Instead of the government producing expenditure, the government gave them unparceled by burden. These individuals were invested into the economy and so they decided to reduce their investment by 37 per cent,” he said.

“So that is the reason why the debt to GDP has dropped but, my brother, Bernard, look at the GDP very carefully and ascertain where the growth is coming from. It will surprise you to know that the growth that we’ve seen, the bulk of it, is coming from mining,” he added.

Ghana’s debt-to-GDP

Ghana’s debt-to-GDP ratio has experienced fluctuations in recent years, reflecting the country’s economic challenges and fiscal policies. 

In 2020, the ratio peaked at approximately 80.4 per cent. However, by 2024, there was a notable decrease, with reports indicating a reduction to 61.8 per cent.

In his presentation of the 2025 Budget Statement on Tuesday, March 11, 2025, Dr Forson emphasized the government’s commitment to continuing these efforts, which include significant cuts in public spending. 

These measures, alongside a broader economic restructuring programme, he said have played a key role in improving Ghana’s fiscal health.

Looking forward, forecasts suggest a continued positive trend. Projections indicate that Ghana’s debt-to-GDP ratio will decrease by a total of 15.6 percentage points between 2024 and 2029, reaching approximately 66.92 per cent by 2029, according to statista.com.

These developments reflect Ghana’s ongoing efforts to manage its public debt effectively while striving for economic stability and growth.