Amin Adam raises sovereign-bank nexus concerns as banks hold GH¢190bn in government debt

Former Finance Minister Dr Mohammed Amin Adam has expressed concerns over the increasing exposure of Ghana's banking system to government debt, warning that stronger ties between the sector and sovereign risk could jeopardize financial stability. Over the course of seven months, bank holdings of domestic government debt rose from GH¢148.7 billion in January to GH¢190.1 billion in July 2026, marking a GH¢41.3 billion increase.

The deposit money banks alone accounted for GH¢36.2 billion of this rise, with their share of domestic debt expanding from 26.5% to 31.9%. This surge suggests that banks absorbed around two-thirds of the overall increase in domestic debt during this period.

While Dr Amin recognized that domestic investors could serve as a reliable source of government financing, particularly when external borrowing options were limited, he cautioned that the concentration of debt exposure posed risks. He explained that this deepened the sovereign-bank nexus, highlighting the banks' potential advantages such as liquid collateral and interest income, but also their heightened vulnerability to fluctuations in government debt valuations, restructuring, and payment risks.

The former minister further warned that higher exposure to government securities might limit the credit available to private businesses, urging for more transparent debt issuance and competitive pricing to bolster the domestic market without placing undue strain on bank balance sheets. He advocated for evaluating Ghana's debt recovery not solely by the size of the debt stock but also by how financing risks were spread across the financial system.