Banks not directed to make provisions against risks from T-Bills, says Governor Addison
Governor of the Central Bank, Dr Ernest Addison, has said banks in the country have not been directed to make provisions for risks associated with purchases with government’s short term debt securities – Treasury Bills.
He made the assertion during the 114th Monetary Policy Committee (MPC) press briefing on Monday, September 25, 2023.
“We have not instructed banks to make provisions for any risks associated with treasury bills,” he remarked.
The Governor’s assertion was in response to fears of a possible re-structuring of the T-Bills due to the little success attained in getting external creditors to restructure the country’s external debt coupled with the high and unsustainable interest rates on the short-term debt instruments as the country undergoes its first review of the $3bn IMF programme this month.
Meanwhile, rating agency, Fitch Ratings has indicated its skepticism regarding the inclusion of Treasury bills (T-bills) in Ghana’s Domestic Debt Exchange Programme.
The rationale behind Fitch’s stance lies in the delicate balance between high yields on short-term securities and the indispensable role that T-bills play in sustaining Ghana’s fiscal stability.
Total outstanding T-Bills issued by Government as of end-August 2023 stood at GHS 55bn.
With interest rates on T-Bills hovering between 28% and 32%, Government is expected to make interest payments above GHS 17bn per annum.
Meanwhile, the Bank of Ghana has revealed that Ghana’s public debt witnessed a notable uptick, surging by approximately ¢6.3 billion during the second quarter of 2023. This substantial increase propelled the nation’s total debt to ¢575.5 billion, which translates to some $52.3 billion.
Strikingly, this figure represents a significant 71.9% of Ghana’s Gross Domestic Product (GDP).
Breaking down the components of Ghana’s public debt, data from the Central Bank discloses that the external component reached $29.9 billion (¢328.6 billion) in June 2023, surpassing the figure recorded in April 2023, which stood at $29.3 billion (¢321.3 billion).
In contrast, the domestic debt stood at ¢246.9 billion at the close of June 2023, constituting approximately 30.8% of the nation’s GDP.
