The Ghana Association of Banks (GAB) has warned that the government’s growing reliance on commercial banks to finance capital expenditure (CAPEX) presents both opportunities for economic growth and risks to financial system stability, describing the approach as a delicate balancing act.
In its 2026 Industry Outlook, GAB notes that Ghana’s fiscal position is entering a phase of nominal expansion, driven by rising revenues and higher public spending. Total government revenue is projected to increase from about GHS 230 billion in 2025 to GHS 268.1 billion in 2026, rising steadily to nearly GHS 392 billion by 2029.
This improvement is underpinned largely by stronger tax mobilisation, with tax revenues projected to grow from GHS 190 billion in 2025 to GHS 224 billion in 2026, reaching close to GHS 335 billion by 2029.
According to GAB, this revenue trajectory is positive for the banking system because it reduces fiscal uncertainty and strengthens the sovereign’s capacity to meet its obligations, thereby lowering systemic risk across the financial sector.
On the spending side, however, the scale and structure of expenditure expansion are where risks begin to surface. Total government expenditure is projected to rise from about GHS 269.5 billion in 2025 to GHS 302.5 billion in 2026, climbing further to nearly GHS 439 billion by 2029. A defining feature of this spending profile is the sharp rise in capital expenditure.
CAPEX is expected to jump from about GHS 32.7 billion in 2025 to GHS 57.5 billion in 2026, before increasing further to over GHS 83 billion by 2029. GAB interprets this shift as a deliberate policy move toward growth-enhancing investments, particularly in infrastructure and productive sectors. Over the medium term, such spending is expected to improve economic activity, firm-level cash flows, and borrowers’ repayment capacity, outcomes that ultimately support banks’ asset quality.
However, GAB stresses that the financing mix for this capital spending is critical. The report indicates that about 60% of government financing would be supported by commercial banks, creating what the association describes as a “double-edged sword” for the economy.
On one hand, increased government borrowing boosts banks’ interest income and provides a predictable outlet for liquidity. On the other hand, heavy domestic financing of CAPEX risks crowding out private sector credit, as banks redirect funds away from businesses toward sovereign instruments. This reallocation can push up lending rates, weaken private investment, and slow broad-based economic expansion.
As the report cautions, “while CAPEX can be growth-enhancing, excessive reliance on domestic financing without careful structuring risks may deprive the private sector of adequate credit for growth and expansion.”
GAB also draws attention to the persistence of debt-service pressures. Although interest payments are projected to stabilise around GHS 57–59 billion in 2026–2027, they are expected to rise again to about GHS 70 billion by 2028 and over GHS 80 billion by 2029, continuing to absorb a significant share of government resources. This dynamic means that any slippage in revenue performance could quickly translate into higher financing needs, with implications for sovereign risk and banks’ balance sheets.
Encouragingly, the outlook suggests some easing of pressure on domestic banks over time. Total government financing needs are projected to decline from about GHS 64 billion in 2026 to GHS 44.6 billion in 2027, while commercial banks’ contribution is expected to peak and then fall from GHS 38.3 billion in 2026 to about GHS 29 billion by 2029. At the same time, foreign and non-bank domestic sources are expected to play a growing role in CAPEX financing.
GAB argues that this evolving financing pattern could help reduce the crowding-out effect that has historically constrained private sector credit in Ghana. As government demand for bank financing moderates, banks may be better positioned to reallocate balance-sheet capacity toward SMEs and productive sectors linked to infrastructure supply chains.
Still, the association is clear that risks remain. As it notes, “the structure and sustainability of public debt remain central to sovereign risk assessments, which feed directly into banks’ capital adequacy, risk-weighting of government exposures, and stress testing frameworks.”
For banks, the challenge lies in balancing the short-term gains from sovereign lending with the longer-term need to support private sector growth while containing concentration and credit risks.
