Government lowers Treasury Bill rates, receives 121.6% oversubscription
Government has secured ¢6.15 billion ($1.14 billion) from the latest Treasury bill auction, indicating an oversubscription of approximately 121.6%, according to the Bank of Ghana. Despite the successful auction, the government accepted only ¢4.52 billion of the bids, mostly from banks. The auction saw a reduction in the pricing of the short-term instruments from 35% to a yield of 24.16% for the 91-day T-bills, while that of the 182-day and 364-day bills were sold at 26.55% and 27.54% respectively.
The auction results indicate that the 91-day T-bill received bids worth ¢2.73 billion, but the government accepted only ¢1.16 billion. The 182-day bills tendered were estimated at ¢1.526 billion, of which the government accepted ¢1.16 billion. Additionally, the bids tendered for the 364-day bill were valued at ¢1.886 billion, of which the government accepted ¢1.882 billion.
The government had previously rejected all bids for the short-term securities on March 3, 2023, due to concerns about the increasing debt service burden at the current rates of around 35%. However, it reopened the tender for the auction on March 7, 2023.
It is important to note that the interest costs for the instruments have significantly gone down, which will help to reduce the total interest servicing of the short-term securities going forward. This development could signal a positive trajectory for Ghana’s fiscal outlook, which has been under strain due to the country’s high public debt estimated to be GHC576 billion ($45 billion) as of November 2022.
Ghana’s economy heavily relies on commodity exports such as gold and oil, and the recent slump in global commodity prices has contributed to the country’s economic challenges. The government has been working to restructure its debt by asking local bondholders to exchange old debt for new bonds that pay lower interest rates, which is expected to provide some relief to the government’s strained finances.
President Nana Akufo-Addo, in his State of the Nation Address on March 8, 2023, defended his government’s borrowing and spending practices, stating that his administration has spent prudently on urgent needs of the country such as roads, bridges, schools, and social protection programs. The President also acknowledged the need to improve the country’s infrastructure and invest in education and healthcare to equip Ghana’s young people to compete in the global economy.
Despite the government’s efforts to address the country’s fiscal challenges, concerns remain about Ghana’s economic future given the steady rise in public debt over the past decade and the recent economic downturn.