Africa's growing reliance on domestic borrowing is reducing exposure to exchange-rate shocks but shifting financial risks onto domestic banking systems, Bank of Ghana Governor Johnson Pandit Asiama has warned.

The shift towards domestic debt has accelerated across sub-Saharan Africa since global interest rates began rising in 2022, as many governments lost access to international bond markets following a sharp increase in borrowing costs.

Speaking at the Bank for International Settlements (BIS) Roundtable of African Central Bank Governors, Asiama said Africa's public debt landscape was increasingly being reshaped by domestic financing rather than external capital markets, as tighter global financial conditions made foreign borrowing more expensive and less predictable.

"What began as a response to tighter external financing is increasingly becoming a strategic policy choice," he said, as quoted by the Business & Financial Times. "Domestic borrowing is strengthening resilience by reducing external vulnerability, but it is also relocating risk into our own financial systems."

As banks increase their holdings of government securities, they become more exposed to sovereign fiscal stress while reducing credit available to households and businesses, reinforcing the so-called sovereign-bank nexus.

Asiama said several African economies had entered 2026 in a stronger macroeconomic position following years of fiscal adjustment and structural reform. Limited exposure to recent tariff measures and firmer commodity prices, particularly gold, had also supported growth across the continent.

Drawing on Ghana's experience, the central bank governor said the country had shifted from crisis management to rebuilding long-term fiscal sustainability following the successful completion of its debt restructuring under the International Monetary Fund's Extended Credit Facility programme.

Inflation had fallen from more than 54% in 2022 to 3.7% in May 2026, while the government had returned to a primary fiscal surplus, he said. Gross international reserves stood at $14.4bn at the end of May, equivalent to 5.7 months of import cover, reflecting stronger domestic resource mobilisation and sustained policy reforms.

Ghana's debt crisis, Asiama said, stemmed from persistent fiscal deficits, a narrow revenue base and growing reliance on external commercial borrowing before tighter global financial conditions shut the country out of international capital markets. The response combined debt restructuring with fiscal consolidation and institutional reforms aimed at restoring debt sustainability and policy credibility.

Several African frontier economies, including Kenya, Egypt and Côte d'Ivoire, have also increased their reliance on domestic debt markets in recent years as access to international capital has become more constrained.

Recent Treasury bill auctions suggest Ghana's government continues to enjoy strong access to domestic financing, although investor demand has moderated from the exceptionally strong levels seen earlier in the year, the Business & Financial Times writes. Accepted bids fell to GHS20.5bn ($1.8bn) in April from GHS48.5bn in January and GHS35bn in February as subscriptions eased and the Treasury adopted a more selective issuance strategy.

Even so, the government refinanced almost all of its April maturities, rolling over GHS20.5bn against GHS21.3bn in maturing bills. Yields also showed signs of normalisation, with the 364-day Treasury bill climbing back into double digits to 10.20%, while the 91-day and 182-day bills closed at 4.92% and 6.97%, respectively.

While greater reliance on local-currency borrowing reduces exchange-rate mismatches on sovereign balance sheets, Asiama cautioned that it also concentrates risks within domestic financial systems.

He said large volumes of short-term domestic debt could complicate liquidity management, distort interest-rate formation and weaken monetary policy transmission, underscoring the need for closer coordination between debt managers and central banks while preserving central bank independence.

Policymakers should focus on building deeper, more diversified domestic capital markets supported by a broader investor base to ensure today's financing solution does not become tomorrow's financial vulnerability, Asiama said.

He also cited tighter global financial conditions, a stronger US dollar and persistent geopolitical uncertainty as continuing external risks despite the recent easing in oil prices.

African governments must deepen domestic debt markets without crowding out private-sector credit while managing the growing sovereign-bank nexus before the next external shock emerges, Asiama said.

The IMF and World Bank have long encouraged African governments to deepen local-currency debt markets to reduce exchange-rate risk, while cautioning that excessive reliance on domestic banks can crowd out private investment and weaken financial stability.

Ghana's post-default recovery has become one of Africa's most closely watched reform programmes, making its approach to rebuilding domestic debt markets a reference point for other frontier economies.