A Senior Lecturer at the Department of Finance at the University of Cape Coast, Seyram Kawor has said Ghana’s heavy reliance on domestic borrowing could limit access to funds for businesses and private investors.
He explained that with Ghana currently relying largely on the domestic market, government competes with businesses and other investors seeking funds.
“When you rely on the domestic market, what may be happening is that you may be crowding out businesses and investments that will want to borrow from the market,” he said on Joy Prime.
Kawor said government’s reliance on short-term instruments, including 91-day, 182-day and 364-day Treasury bills, also creates another concern when such funds are used for long-term projects.
“If we are borrowing short-term and we use it for long-term project, it means that you continuously have to go to the market to borrow and then you have to roll over the debt,” he explained.
He said this could make it difficult to establish a stable funding system for long-term projects, particularly because Ghana is currently unable to borrow from the international financial market.
Kawor also cautioned that borrowing comes with a cost because rising interest rates could increase the amount government has to find to service its debt.
“If you are not investing the money in productive sectors that will generate the needed income to pay the debt, then that becomes another issue for us,” he said.
