Ghana's increasing reliance on domestic borrowing is creating new risks within national banking systems. Bank of Ghana Governor Dr. Johnson Pandit Asiama stated this shift reduces exposure to foreign exchange shocks. However, it also relocates financial risks into the country's own financial systems.
This development occurs as tighter global financial conditions make foreign borrowing more expensive. African economies, including Ghana, are increasingly opting for local financing over external capital markets. Dr. Asiama noted that domestic borrowing strengthens resilience by reducing external vulnerability. Yet, it introduces concentration risks within the domestic financial system.
Ghana's economic narrative includes a notable recovery since 2022. The country successfully completed its debt restructuring under the International Monetary Fund’s Extended Credit Facility programme. Inflation dropped from over 54 percent in 2022 to 3.7 percent in May 2026. Gross international reserves also rose to US$14.4 billion by May, covering 5.7 months of imports. These improvements reflect strong domestic resource mobilisation and sustained policy reforms.
Dr. Asiama spoke at the Bank for International Settlements (BIS) Roundtable of African Central Bank Governors. He explained that Ghana's debt crisis stemmed from persistent fiscal deficits and a narrow revenue base. An over-reliance on external commercial borrowing before global financial markets tightened also contributed. Ghana's response involved debt restructuring, fiscal consolidation, and institutional reforms. These actions aimed to restore debt sustainability and policy credibility.
Recent Treasury bill market data indicates the government retains access to domestic financing. However, investor demand has moderated from earlier highs. Accepted bids declined to GHS 20.5 billion in April. This was down from GHS 48.5 billion in January and GHS 35 billion in February. Despite this, the government successfully refinanced GHS 20.5 billion against GHS 21.3 billion in maturing bills in April. Yields also showed signs of normalisation, with the 364-day Treasury bill reaching 10.20 percent.
While local currency borrowing reduces currency mismatches, it concentrates risks. Dr. Asiama highlighted that when banks hold a large share of government securities, sovereign stress can quickly become banking-sector stress. He stressed the need for closer coordination between debt managers and central banks. This coordination is crucial for managing large volumes of short-term domestic debt. Such debt can complicate liquidity management and distort interest rates.
Policymakers must focus on developing deeper and more diversified domestic capital markets. These markets need a broader investor base. This will prevent today's financing solutions from becoming tomorrow's financial vulnerabilities. The Governor also noted ongoing external risks. These include tight global financial conditions, a stronger US dollar, and geopolitical uncertainties. African governments must deepen domestic debt markets without crowding out private sector credit. They must also manage the growing link between sovereign debt and banks before the next external shock.