Restructuring of T-Bills will be disastrous for Government, says Managing Partner of Treasury Hub Ghana
Managing Partner for Treasury Hub Ghana, Kwaku Oppong, has said a restructuring of T-Bills will be disastrous for the Government.
According to him, this is because, funds from the short-term debt instruments finance one-third (1/3) of Government’s fiscal deficit for the current fiscal year – 2023.
“It would be disastrous to restructure T-bill considering it funds a third of Ghana’s fiscal deficit,” he stated speaking during NorvanReports’ X Space Open Forum themed, “To Restructure or Not To Restructure T-bills.”
He, however, agreed that current interest rates on T-Bills were too high and needed to be reduced.
Government’s expenditure for the 2023 fiscal year was revised downwards from the initial GHS 227.7 billion budget allocation to the current GHS 206 billion in the 2023 mid-year budget review.
This is against a total revenue target of GHS 143.9bn leaving a deficit gap of GHS 62.1bn.
The possible restructuring of the T-Bills is purported to be 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.
Toby Illes, Senior Director of Emerging Market and African Sovereign Ratings at Fitch Ratings, articulated this perspective during the “Reform and New Challenges in Western Africa” Africa Webinar Series.
According to Mr. Illes, the Government is unlikely to embark on the restructuring of T-bills, given their critical significance as a financial instrument for state financing.
“It would be suicidal,” warns Mr. Illes, emphasizing the perilous consequences of including T-bills in any domestic debt overhaul. T-bills, known for their lucrative returns within short timeframes, are indeed the last bastion of financial recourse for Government.
“We don’t expect T-bills to be restructured. Just given the need for that financing tool, we wouldn’t expect that to be included”.
“In Ghana’s case, it is generally very complicated to include that in domestic debt restructuring. I guess the main question is that domestic debt restructuring we would have now is about that the domestic debt restructuring is more about medium-term when actually you move a lot of these maturities down the line”, he said.
He however expressed worry about the huge domestic debt servicing expected in the years 2027 and 2028 respectively.
“The policy adjustment from now till then is a downward trend. However, as I said when we get to 2027-2028 we would have a huge hung of domestic debt service.”
