The Governor of the Bank of Ghana (BoG), Dr Johnson Pandit Asiama, has cautioned that while Africa’s growing reliance on domestic borrowing is reducing exposure to foreign exchange shocks, it is creating new risks within national banking systems.
He said the next phase of public debt reforms should focus on developing deeper, longer-term and more diversified domestic debt markets to ensure sustainable financing without undermining financial sector stability.
Speaking at the Bank for International Settlements (BIS) Roundtable of African Central Bank Governors, Dr Asiama said many African economies were increasingly turning to domestic financing as tighter global financial conditions made external borrowing more expensive and less predictable.
“What began as a response to tighter external financing is increasingly becoming a strategic policy choice,” he said.
“Domestic borrowing is strengthening resilience by reducing external vulnerability, but it is also relocating risk into our own financial systems.”
The Governor said several African economies entered 2026 from a stronger macroeconomic position after years of fiscal adjustment and structural reforms.
He noted that relatively limited exposure to recent tariff measures and favourable commodity prices, particularly for gold-producing countries, had also supported economic growth across the continent.
Drawing on Ghana’s experience, Dr Asiama said the country had moved from crisis management to rebuilding long-term fiscal sustainability following the successful completion of its debt restructuring programme under the International Monetary Fund’s Extended Credit Facility.
He said the country’s economic indicators had improved significantly, with inflation falling from more than 54 percent in 2022 to 3.7 percent in May 2026.
According to him, government is also recording a primary fiscal surplus, while gross international reserves reached US$14.4 billion at the end of May, equivalent to 5.7 months of import cover.
He attributed the improvement to stronger domestic revenue mobilisation, prudent fiscal management and sustained structural reforms.
Dr Asiama explained that Ghana’s debt crisis was driven by persistent fiscal deficits, a narrow revenue base and increasing dependence on external commercial borrowing before tightening global financial conditions effectively shut the country out of international capital markets.
He said the country’s response combined debt restructuring with fiscal consolidation and institutional reforms aimed at restoring macroeconomic stability.
Commenting on developments in the domestic debt market, the Governor said government continues to maintain access to local financing, although investor demand has moderated from the exceptionally high levels recorded earlier this year.
Accepted Treasury bill bids declined to GH¢20.5 billion in April from GH¢48.5 billion in January and GH¢35 billion in February as subscriptions eased and government adopted a more selective borrowing strategy.
Despite the slowdown, government refinanced almost all maturing Treasury bills in April, rolling over GH¢20.5 billion against GH¢21.3 billion that matured during the period.
Treasury bill yields also showed signs of normalisation, with the 364-day bill rising to 10.20 per cent, while the 91-day and 182-day bills closed at 4.92 percent and 6.97 percent, respectively.
Dr Asiama noted that although borrowing in local currency reduces exchange rate risks on the sovereign balance sheet, it could increase concentration risks within the domestic financial system.
“Instead of currency mismatches, we increasingly face concentration risks within the domestic financial system,” he said.
“Where banks hold a significant share of government securities, sovereign stress can quickly become banking-sector stress.”
He warned that excessive reliance on short-term domestic borrowing could complicate liquidity management, distort interest rate formation and weaken the effectiveness of monetary policy.
The Governor therefore called for stronger coordination between debt managers and central banks while safeguarding central bank independence.
He urged African policymakers to deepen domestic capital markets by extending debt maturities, diversifying the investor base and strengthening market resilience to prevent current financing strategies from becoming future financial vulnerabilities.
Dr Asiama also cited tighter global financial conditions, a stronger US dollar and persistent geopolitical uncertainty as key external risks facing African economies despite the recent moderation in oil prices.
He said governments across the continent must continue to strengthen domestic debt markets without crowding out private sector credit while carefully managing the growing links between sovereign debt and the banking sector.
