Tax analyst Francis Timore Boi has cautioned that the Ghana government’s planned GH¢85 billion in net domestic financing for 2027 could undermine efforts to make loans more affordable for businesses if the borrowing competes with the private sector for funds from banks and other financial institutions. Editorial Standards
He has called on the government to provide greater clarity on how it intends to finance its expenditure commitments while protecting access to credit for businesses, particularly those operating in productive sectors of the economy.
Boi made the remarks on Channel One TV’s The Big Issue on Saturday, November 14, following the presentation of the 2027 Budget by Finance Minister Dr Cassiel Ato Forson on November 12.
He warned that large-scale government borrowing from the domestic market could place the state in direct competition with private businesses seeking financing for investment, expansion and job creation.
“If you decide to go and borrow GH¢85 billion on the local market, people will interpret it to be you are competing with the private sector in terms of financing,” he said.
His concern centres on whether Ghana’s financial sector can accommodate the government’s funding requirements without reversing recent improvements in lending conditions.
Why domestic borrowing raises concerns
Domestic borrowing is an important financing option for governments, particularly when access to external capital markets is expensive or limited.
However, when government demand for funds increases significantly, it can affect the amount of money available to private businesses.
Banks and other investors may choose to purchase government securities because they offer relatively predictable returns.
If government borrowing becomes more attractive or requires higher interest rates to attract buyers, private companies may face greater difficulty securing loans at affordable costs.
This situation is commonly described as crowding out. It occurs when government borrowing absorbs financial resources that could otherwise support private investment.
For Ghanaian businesses, the potential consequences include higher borrowing costs, reduced access to working capital and delays in projects that could create jobs or increase production. Corrections Policy
Boi acknowledged that domestic borrowing has advantages, particularly because it allows government to raise funds in cedis rather than increasing its demand for foreign currency to finance expenditure.
He considered the approach sensible from the perspective of reducing pressure on the cedi but argued that its implementation must be carefully managed.
Treasury bill rates could come under pressure
The analyst also raised concerns about what could happen if banks and other lenders become reluctant to finance the government’s borrowing programme at prevailing interest rates.
He suggested that authorities could be forced to offer higher returns on Treasury bills and other government securities to attract investors.
“If banks start, or the lenders start, rejecting your borrowing, the only thing you can do is to increase your Treasury bills and other things up, and then you start competing,” he cautioned.
Higher Treasury bill rates could increase the government’s borrowing costs and potentially influence interest rates across the financial market.
For businesses, that could weaken the benefits of recent reductions in lending rates, making it more expensive to finance equipment, purchase inventory and expand operations.
The concern is particularly relevant as Ghana seeks to encourage private investment as part of its broader economic transformation agenda.
What the 2027 Budget says about borrowing
The 2027 Budget, presented under the theme New Economy, New Ghana, Jobs and Prosperity, projects total government expenditure of GH¢389.2 billion.
According to the Finance Ministry’s budget documents, net domestic financing is expected to reach approximately GH¢85 billion, equivalent to 4.7 per cent of gross domestic product.
The financing plan includes GH¢59 billion from banks and GH¢25.9 billion from non-bank sources.
The government also projects a net repayment of GH¢17.7 billion in external financing, meaning external repayments are expected to exceed new external financing during the year.
The cash based fiscal deficit is projected at GH¢65.8 billion, representing 3.6 per cent of GDP, while the commitment based deficit is estimated at GH¢51.9 billion, or 2.9 per cent of GDP.
A report outlined the major figures in the budget, including the GH¢389.2 billion expenditure plan, GH¢61 billion allocated for interest payments and GH¢30 billion earmarked for the first year of the government’s New Economy programme.
The budget also allocates GH¢98.4 billion for capital expenditure in the full Budget Statement, although different figures appeared in parts of the budget presentation.
These spending commitments demonstrate the scale of financing required to implement the government’s development priorities.
Balancing economic growth with affordable credit
Boi’s warning comes at a time when the government is seeking to translate improving macroeconomic conditions into stronger private-sector activity.
The 2027 Budget targets economic growth of at least 5.2 per cent and seeks to stimulate production through investments in agriculture, energy, manufacturing, technology and other strategic industries.
However, these ambitions depend partly on the ability of businesses to access affordable financing. Editorial Ethics & Independence
A report on Boi’s comments highlighted the potential tension between the government’s domestic financing requirements and the availability of credit for private enterprises.
The broader challenge is how government can raise the resources needed for public investment without placing excessive pressure on the same financial institutions that support businesses.
A credible borrowing strategy could help address these concerns through careful timing of government securities issuance, a balanced mix of financing sources and improved management of public expenditure.
The government’s financing strategy faces scrutiny
The debate over domestic borrowing is likely to remain an important part of discussions surrounding the 2027 Budget.
While government financing is necessary to fund infrastructure, public services and development programmes, the long term benefits of such spending depend on whether it supports productivity and economic expansion.
For businesses, the availability and cost of credit can determine whether they are able to invest, employ additional workers and compete effectively.
Boi’s comments therefore raise a central question for economic policymakers, how can Ghana finance its development priorities while ensuring that private enterprises are not pushed aside in the competition for capital? Newscard
The government’s response and the actual conditions in the domestic financial market will be important in determining whether the GH¢85 billion financing plan can be implemented without undermining private-sector credit.
Ultimately, the success of the 2027 Budget will depend not only on how much government spends but also on whether its financing decisions create an environment in which businesses can grow, invest and generate sustainable employment.