Surprisingly, only one player keeps hogging the spotlight in Ghana‘s financial ecosystem: the government. With claims on domestic assets consistently above GH₵ 110 billion throughout 2024, the government’s appetite for borrowing has left private businesses scrambling for room to breathe.
This reliance on domestic borrowing to fund government activities is raising questions about its broader implications for the economy, particularly private sector growth. When the government borrows heavily, it attracts banks and financial institutions with its “safe and reliable” securities.
This means less money is available for businesses to borrow. So, if you’ve wondered why getting a loan feels impossible or why interest rates keep climbing, here’s your answer, it’s a classic case of the government taking the bigger slice of the pie.
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Take this for example: by December 2024, claims on the government had soared to GHC 130.1 billion, while private businesses could only access GH₵ 74.3 billion. Imagine trying to run a business, but the funds you need are all tied up funding government projects.
That’s the reality for many small and medium-sized enterprises (SMEs) in Ghana, which drive much of the country’s growth.
But there’s more to it than just a money squeeze. When the government borrows so much, it forces interest rates higher. This is because to make its bonds attractive, the government must offer competitive returns.
This ripples across the economy, making loans costlier for everyone, businesses and individuals alike.
For businesses, this means cutting back on expansion, hiring fewer workers, or, in some cases, closing shops altogether. For you, it could mean higher costs for goods and services as businesses pass on their increased expenses.
To be fair, the government borrows to meet pressing needs, from paying salaries to funding infrastructure projects. But when this borrowing tilts too heavily toward domestic markets, it stifles private sector growth.
And here’s the kicker: the private sector is the engine of any thriving economy. If businesses can’t expand, create jobs, or innovate, the whole country feels the pinch. While governments must fund critical development projects and meet fiscal obligations, they must also ensure that borrowing does not choke off private sector growth.
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