Gov’t running economy on T-Bills – Seth Terkper
Government’s reliance on Treasury Bills as the sole source of financing for its operations has raised concerns among financial analysts. Former Finance Minister, Seth Terkper, highlighted this issue during an engagement with journalists, noting that the government cannot issue new bonds, whether domestic or foreign, as they are likely to fail or be severely undersubscribed.
Terkper pointed out that the government’s success in experiencing high subscription rates for Treasury Bills is mainly due to the successful debt restructuring program and the potential of securing an International Monetary Fund (IMF) bailout. However, he emphasized that the government must continue to borrow to roll over matured bills to maintain confidence in the Treasury Bills, even if it lacks the revenue to pay for them.
This situation presents a worrying picture of the Ghanaian economy, which is currently being run on short-term debt instruments. The Treasury Bills, which have maturities ranging from 91 days to one year, are not sustainable sources of financing for a government that needs to make long-term investments in infrastructure, education, and health.
Moreover, the reliance on Treasury Bills exposes the economy to significant risks. If investors lose confidence in the government’s ability to repay the bills, they may demand higher yields, which could lead to a rise in interest rates and inflation. This scenario could lead to a vicious cycle, where the government must borrow more to finance its operations, leading to higher debt levels and weaker economic growth.
The government’s inability to issue new bonds also points to deeper structural issues in the Ghanaian economy. The lack of investor confidence may be due to concerns about the country’s fiscal sustainability, political stability, and weak economic fundamentals. These issues will require significant policy reforms and investments to address, which may take time and require external assistance.
While the successful debt restructuring program and potential IMF bailout may provide short-term relief, they do not offer a sustainable solution to the government’s financing needs. The government must explore other financing options, such as public-private partnerships, sovereign wealth funds, and foreign direct investment, to diversify its sources of funding and reduce its reliance on short-term debt instruments.
The Ghanaian government’s reliance on Treasury Bills as the sole source of financing for its operations is a cause for concern. The lack of alternative funding sources and the exposure to significant risks highlight the need for significant policy reforms and investments to address the underlying structural issues in the economy. It is imperative for the government to explore other financing options and reduce its dependence on short-term debt instruments to achieve sustainable economic growth and development.
