Auditing and accounting firm, Deloitte Ghana has called on government to place primary focus on reducing the country’s total debt to Gross Domestic Product ratio to sustainable levels.

In its review of the 2023 Budget Statement and Economic Policy, the firm believes the ratio must come down to at least 60 percent threshold in the medium to long term.

The firm explained that the current total domestic debt of 100 percent of GDP is rather worrying and therefore requires keen efforts and measures to reduce the figure to sustainable levels.

It noted that although government has often relied on the international capital market to raise borrowed funds, the domestic component of the public debt has been on an upward trend.

“It is important to note that the increasing domestic debt limits the amount of credit available to private businesses as banks tend to lend more to the government, which is considered much lower in terms of risk profile as compared to the private sector. This ultimately results in higher lending rates for private sector businesses to compensate for their higher default risk”, Deloitte explained.

It further called on government to reduce its dependence on the domestic debt market through pragmatic and innovative revenue generation measures.

The firm further said government must also adopt effective measures to boost the country’s foreign exchange reserves and stabilise exchange rates in a bid to reduce the external debt accumulation resulting from local currency's depreciation.

“Commercial banks should also be incentivized to increase lending to the private sector,” Deloitte said in its review.

Touching on government’s intended Debt Exchange Programme, Deloitte Ghana said the implementation could result in cash retention as it would have primarily deferred the commitment to settle maturing investments within the short term.

It noted that government could however channel the cash retained to other policies aimed at boosting local production and economic development.

In all, Deloitte said the debt exchange programme will also culminate in reduction of interest payments and overall improved cash flows in the short to medium term.


MA