Mona Quartey: Oversubscribed Short-Term Debt to Boost Private Sector Growth

Former Deputy Finance Minister Mrs Mona Quartey has dismissed concerns that the oversubscription of short-term debt instruments could have negative economic consequences, arguing that it will rather benefit the private sector.

Speaking on “The Big Issue” on March 15, Mrs Quartey explained that the increased demand for government securities is creating liquidity within the banking sector, allowing commercial banks to extend more credit to private businesses.

“This phenomenon, known as ‘crowding in’ the private sector, is a reversal of previous trends where excessive government borrowing crowded out private businesses from accessing funding,” she said.

In recent years, Ghana‘s banking sector has been criticized for favoring government securities over lending to businesses, as treasury bills and bonds offered a safer and more attractive return.

This often-limited access to credit for small and medium enterprises (SMEs), which were crucial to the country’s economic growth.

However, Mrs Quartey believed that current oversubscription of short-term debt instruments is allowing banks to rebalance their portfolios, ultimately leading to increased lending to the private sector.

This could help stimulate business expansion, job creation, and overall economic growth.

Despite her optimism, some analysts warn that high government borrowing still poses risks, particularly if debt levels become unsustainable.

Further, excessive short-term borrowing could lead to increased interest payments, putting pressure on government finances and limiting future fiscal flexibility.

Nonetheless, Quartey maintained that as long as the government manages its debt prudently and ensures a conducive economic environment, the private sector will benefit from improved access to capital, driving long-term economic stability.

Last Updated on March 16, 2025 by samboad