Ghana has leaned increasingly on domestic borrowing over the past decade to finance its budget and ease debt pressures, reflecting a wider trend among low-income countries, according to the International Debt Report 2025.
The report shows that public domestic debt has climbed steadily in nations under the Low Income Country Debt Sustainability Framework, as governments seek to meet growing financing demands while limiting exposure to foreign exchange risks. Ghana is cited as one of the frontier economies that successfully expanded its domestic debt market during this period.
Between 2014 and 2024, domestic debt in low-income countries more than doubled relative to the size of their economies, rising on average from 8 percent of GDP to 17 percent. Nearly half of this increase occurred before the coronavirus pandemic, underscoring structural financing pressures rather than temporary shocks.
The World Bank noted that domestic borrowing has helped countries such as Ghana manage widening fiscal deficits amid 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 growth of the local bond market has been central to this shift. The report highlights Ghana as one of a few frontier economies able to issue local currency bonds with maturities beyond 15 years — a significant step in extending debt timelines and easing refinancing risks.
By the end of 2024, marketable instruments such as treasury bills and bonds accounted for 59 percent of domestic debt across low-income countries. Loans and central bank financing made up 24 percent, while arrears represented 17 percent. Ghana’s borrowing profile mirrors this pattern, with a growing share raised through the domestic market. The World Bank observed that this trend has also supported improvements in debt transparency in some countries.
However, the report cautions that rising domestic debt brings new risks. While most of the debt stock in 2024 was medium to long term, borrowing patterns shifted in 2025 toward shorter maturities.
According to the report, 41 percent of new domestic debt issued in 2025 was short term, including central bank financing. This raises 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 warned.
The report added that the average maturity of new longer-term domestic debt in low-income countries is now about 4.5 years. For frontier economies such as Ghana, it is slightly longer at five years, but still shorter than what is required for long-term development financing.
The World Bank pledged continued support for countries, including Ghana, to strengthen domestic debt markets with greater emphasis on capital market development and risk management.
As Ghana works to stabilise its economy and rebuild confidence, the report underscores the importance of closely monitoring domestic debt growth. While local borrowing has reduced foreign currency risks, managing maturities and interest costs will remain vital to ensuring long-term debt sustainability.
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