Ghana's growing reliance on domestic borrowing is significantly reducing exposure to foreign exchange shocks. However, this strategy is creating new risks within the national banking system, according to Bank of Ghana Governor Dr. Johnson Pandit Asiama.
Dr. Asiama stated the next phase of debt reforms should focus on building deeper, longer-dated, and more diversified domestic debt markets. He made these remarks at the Bank for International Settlements (BIS) Roundtable of African Central Bank Governors. This shift is increasingly a strategic policy choice as tighter global financial conditions make foreign borrowing more expensive.
This trend fits into Ghana's broader economic story of recovery and reform. The country successfully completed a debt restructuring under the International Monetary Fund’s Extended Credit Facility programme. This marked a transition from crisis management to rebuilding long-term fiscal sustainability. Ghana’s debt crisis prior to this was driven by persistent fiscal deficits, a narrow revenue base, and heavy reliance on external commercial borrowing.
“What began as a response to tighter external financing is increasingly becoming a strategic policy choice,” Dr. Asiama explained. He added, “Domestic borrowing is strengthening resilience by reducing external vulnerability, but it is also relocating risk into our own financial systems.” He cautioned that where banks hold a significant share of government securities, sovereign stress can quickly become banking-sector stress.
Ghana’s economy has shown strong signs of recovery after years of fiscal adjustment. Inflation declined from over 54 percent in 2022 to 3.7 percent in May 2026. The government is also recording a primary fiscal surplus. Gross international reserves stood at US$14.4 billion at the end of May, equivalent to 5.7 months of import cover. These indicators reflect successful domestic resource mobilisation and sustained policy reforms.
Recent Treasury bill market developments suggest the government continues to access domestic financing. Accepted bids declined to GHS 20.5 billion in April from GHS 48.5 billion in January. Subscriptions eased, and the Treasury adopted a more selective issuance strategy. Yet, the government refinanced nearly all its April maturities, rolling over GHS 20.5 billion against GHS 21.3 billion in maturing bills. Yields also showed signs of normalisation, with the 364-day Treasury bill rising back into double digits at 10.20 percent.
While greater reliance on local currency borrowing reduces exchange-rate mismatches, it concentrates risks within domestic financial systems. “Instead of currency mismatches, we increasingly face concentration risks within the domestic financial system,” Dr. Asiama warned. Large volumes of short-term domestic debt could complicate liquidity management and distort interest-rate formation. This also weakens monetary policy transmission.
Policymakers must now focus on developing deeper and more diversified domestic capital markets. These markets need to be supported by a broader investor base. This will ensure today’s financing solution does not become tomorrow’s financial vulnerability. Dr. Asiama also cited tighter global financial conditions, a stronger US dollar, and persistent geopolitical uncertainty as continuing external risks. African governments must deepen domestic debt markets without crowding out private sector credit. Managing the growing link between the sovereign and banks is crucial before the next external shock emerges.