Anyone who has taken out a car loan or bought a house with a mortgage has taken on debt. It's the same for countries. They often need to borrow money to keep services going, with the promise to pay it back.
What is public debt? How does debt get paid back? Here are the basics...
What is the Public Debt?
Public debt is the sum of all outstanding debt owed by the government. It includes not only the money the government has borrowed, but also the interest it must pay on the borrowed money. The government goes into debt when it doesn't collect enough revenue to cover the expenses it incurs from spending on programs such as pensions, military, or building roads and bridges. The revenues come from corporate and income taxes, and the fees the government imposes, such as for road tax, student loans, and talk tax.
Who Owns the Debt?
The government sells securities like bonds and T-Bills to finance its debt. Anyone can buy them (rich men/women), including other countries.
GHANAIANS (rich men/women and institutions) are the biggest holders of Ghana's debt, with institutions and investors holding 55% percent. The rest of the debt (45%) is owned by foreign institutions like World Bank, IMF and Other Countries.
Why the Debt Matters:
A high debt level affects the cost of living, interest rates to buy homes or cars, as well as the overall economy.
Money owed to the people/countries/investors who subsidize the debt by buying debt instruments must be paid off.
If the investors and lenders believe the Ghana can't pay its national debt, they stop loaning the government money and the interest rates go up for banks and consumers.
Debt is repaid through higher taxes and/or spending cuts.
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