Gov’t exceeds auction target; raises over GHS 5bn in T-Bills sale
The Bank of Ghana (BoG) has successfully auctioned 91, 182 and 364 day treasury bills on behalf of the government, raising a significant amount of credit from investors.
The auction raised a total of GHS 5,065 million, exceeding the planned auction target of GHS 2,885 million by GHS 2,180 million. This strong demand for government debt securities indicates a high level of investor confidence in Ghana’s economic stability and growth potential.
Despite the positive outcome, the higher-than-planned credit came at a cost to the government, with interest rates on the 91, 182 and 364 day T-Bills coming in at 37.8%, 35.8% and 35.8% respectively. While these rates are lower than the country’s inflation rate, which stands at 53.1%, they still result in negative returns for investors in real terms. This is a reflection of the current challenging economic environment in Ghana.
Looking ahead, the government has set an ambitious target of raising GHS 2,776 million in its next auction by issuing 91, 182, and 364 day T-Bills. This indicates a continued desire to raise funds from the debt markets, potentially to finance various government initiatives and projects.
While this may provide much-needed funds for development, it also carries risks, particularly if borrowing costs rise or if the funds raised are not invested effectively to promote sustainable economic growth.
These developments in Ghana’s debt market are reflective of a broader trend across the African continent. Many African countries have turned to domestic markets to raise funds amid the economic challenges posed by the COVID-19 pandemic, the ongoing Russia-Ukraine war, and the shutout from the international debt markets. This shift towards domestic borrowing has been necessary due to the need for liquidity, and to avoid over-reliance on external funding sources.
However, it is essential for governments across the region to balance their borrowing needs with the long-term economic sustainability of their countries. High levels of debt can limit the capacity of governments to fund other essential sectors such as health, education, and infrastructure. Therefore, it is crucial for African governments to prioritize sustainable investments that promote economic growth and job creation, rather than relying solely on borrowing to finance short-term needs.
The success of Ghana’s recent T-Bill auction highlights the potential for domestic borrowing to finance government projects and initiatives. However, this must be balanced with the need for sustainable economic growth and development.
As such, policymakers must ensure that borrowed funds are invested effectively, and borrowing costs are managed to prevent an over-reliance on debt. Ultimately, this will help to promote economic stability, job creation, and improve the standard of living for the people of Ghana and the wider African continent.
