Ghana Now Relying More on Domestic Debt – World Bank

By ZED NEWSROOM
Ghana has increasingly turned to domestic borrowing over the past decade to finance its budget and manage debt pressures, in line with a broader shift across low-income countries, according to the World Bank’s International Debt Report 2025.
The report indicates that public domestic debt has risen steadily among countries assessed under the Low Income Country Debt Sustainability Framework, as governments seek to meet growing financing needs while limiting exposure to foreign exchange risks. Ghana is highlighted as one of the frontier economies that have successfully deepened their domestic debt markets during this period.
Between 2014 and 2024, public domestic debt in low-income countries more than doubled relative to the size of their economies. On average, domestic debt rose from 8 per cent of gross domestic product to about 17 per cent. Notably, nearly half of this increase occurred before the COVID-19 pandemic, suggesting that the trend was driven more by structural financing pressures than temporary shocks.
The World Bank observed that domestic borrowing has enabled countries such as Ghana to manage widening fiscal deficits at a time of slow revenue growth and rising development needs.
“Expanding domestic debt markets has allowed governments to finance critical spending while reducing their exposure to exchange rate volatility,” the report stated.
For Ghana, the development of the local bond market has been central to this shift. The report singles out Ghana as one of a few low-income frontier economies able to issue local currency bonds with maturities exceeding 15 years, an important milestone in extending debt maturities and easing refinancing risks.
Across low-income countries, domestic debt is increasingly dominated by marketable instruments such as Treasury bills and Treasury bonds. By the end of 2024, about 59 per cent of domestic debt was issued in marketable securities, while loans and central bank financing accounted for 24 per cent. Arrears made up the remaining 17 per cent.
Ghana’s borrowing profile broadly reflects this pattern, with a growing share of government financing sourced from the domestic market. The World Bank noted that this shift has also contributed to improved debt transparency in some countries.
However, the report warns that rising domestic debt introduces new vulnerabilities. While most of the domestic debt stock in 2024 was medium to long term, borrowing patterns began to shift in 2025 toward shorter-term instruments.
According to the report, about 41 per cent of new domestic debt issued in 2025 was at short maturities, including financing from central banks. This trend heightens refinancing and interest rate risks, particularly in countries with limited fiscal space.
“The increased reliance on domestic debt has reduced exchange rate risks, but it has also heightened refinancing and interest rate pressures,” the World Bank cautioned.
The report adds that the average maturity of new longer-term domestic debt in low-income countries now stands at about four-and-a-half years. For frontier economies such as Ghana, it is slightly longer at around five years, but still below what is required to support long-term development financing.
The World Bank says it will continue to support countries, including Ghana, to strengthen domestic debt markets, with greater emphasis on capital market development and improved risk management.
As Ghana works to stabilise its economy and restore investor confidence, the report underscores the importance of closely monitoring domestic debt growth. While local borrowing has helped reduce foreign currency risks, careful management of maturity profiles and interest costs will remain critical to safeguarding long-term debt sustainability.