The Ghanaian economy may be retrogressing into a Highly Indebted Poor Country (HIPC) status, a senior research fellow at the Institute of Statistical, Social and Economic Research (ISSER), Dr. Robert Osei has warned.

Dr. Osei says Ghana's domestic debt stock has ballooned beyond that of many countries and has therefore expressed fears of the worst for the economy.

He told XYZ BUSINESS that the government must tread cautiously since the situation risks pushing interest rates further up.

“We are gradually reaching the HIPC level based on the debt level particularly the domestic debt. If we don’t break the fiscal gap, interest rates will continue to remain high”, the economist explained.

Dr. Osei added that: “In terms of our domestic debt, it has actually risen and it is not surprising because if you look at our fiscal deficit over the last 7 or 8 years…we do see increasingly the deficit have been significantly higher than most countries around the world in terms of the share of GDP…now this has accumulated. What is happening now is that we are almost in a debt trap”

According to him, “because we have had higher deficits, our domestic debt has gone up. The amount of money we require to actually service the debt is also high. In effect, if you are actually servicing the debt, you have very little fiscal space, and then you turn around to borrow…we are in a kind of a very difficult state with respect to that debt and it is not going to come down easily or anytime soon as I understand it.”

Ghana's public debt stock, according to the Central Bank's Monetary Policy Committee, increased to GH¢43.9 billion, about 49.5 percent of GDP at the end of August.

Out of this, the domestic component amounted to GH¢24 billion compared to GH¢18.5 billion in December 2012.

The Centre for Policy Analysis (CEPA), last year warned that the country could return to HIPC if the government does not control its borrowing and spending.

Ghana joined HIPC in 2001. More than 4 billion dollars of the country's debt were written off as a result.