Ghana’s Growing Reliance on Domestic Borrowing Mirrors Wider Low-Income Country Trend — World Bank Says
Ghana has progressively depended more on domestic borrowing over the past ten years to fund its budget and address rising debt pressures, reflecting a wider pattern among low-income countries, the International Debt Report 2025 has shown.
The report explains that public domestic debt has increased consistently among countries assessed under the Low Income Country Debt Sustainability Framework, as governments look to satisfy growing financing requirements while limiting vulnerability to foreign exchange movements.
Ghana is cited as one of the frontier economies that made meaningful strides in developing its domestic debt market over the period.
From 2014 to 2024, public domestic debt in low-income countries expanded to more than twice its share of economic output, climbing on average from 8 percent of gross domestic product to 17 percent.
Almost half of this buildup occurred ahead of the COVID-19 pandemic, indicating that the trend was largely driven by long-standing structural financing challenges rather than short-term shocks.
The World Bank observed that domestic borrowing has enabled countries such as Ghana to cope with widening fiscal gaps at a time when revenue growth has been weak and development spending needs have continued to rise.
“Broadening domestic debt markets has helped governments fund essential expenditure while lowering exposure to exchange rate volatility,” the World Bank stated.
In Ghana’s case, the strengthening of the local bond market has been a defining element of this transition. The report points to Ghana as one of a limited number of low-income frontier economies that managed to issue local currency bonds with maturities of more than 15 years, helping to lengthen repayment periods and reduce refinancing pressures.
Across low-income countries, the composition of domestic debt has increasingly shifted toward marketable instruments, notably treasury bills and treasury bonds. By the end of 2024, marketable securities accounted for about 59 percent of domestic debt, while loans and central bank financing made up 24 percent.
Arrears represented the remaining 17 percent.
Ghana’s borrowing structure broadly mirrors this trend, with a rising share of government financing sourced from the domestic market. The World Bank noted that the move toward local borrowing has also contributed to improvements in debt transparency in some cases.
The report, however, warns that the rapid growth of domestic debt brings new risks. Although most of the outstanding domestic debt stock in 2024 was medium to long term, issuance patterns began shifting in 2025 toward shorter-dated instruments.
According to the report, 41 percent of new domestic debt issued in 2025 carried short maturities, including borrowing from central banks. This development increases refinancing and interest rate risks, particularly in countries with limited fiscal space.
“The growing dependence on domestic debt has eased exchange rate risks, but it has also intensified refinancing and interest rate pressures,” the World Bank noted.
The report further indicates that the average maturity of newly issued longer-term domestic debt in low-income countries now stands at about four and a half years.
For frontier economies such as Ghana, the average is slightly higher at around five years, though still below what is required to support long-term development financing.
The World Bank said it will continue to assist countries, including Ghana, in deepening domestic debt markets, with a stronger focus on capital market development and effective risk management.
As Ghana seeks to stabilise its economy and rebuild confidence, the report highlights the importance of closely tracking the growth of domestic debt. While greater reliance on local borrowing has reduced foreign currency exposure, careful management of maturity profiles and interest costs will remain essential to preserving long-term debt sustainability.
