Short-term debt instruments oversubscribed by GHS 88m despite negative returns
The Finance Ministry has successfully raised GHS 1,855 million from primary dealers in a recent issuance of short-term debt instruments. The 91-day, 182-day, and 364-day Treasury Bills were oversubscribed by GHS 88 million, signaling strong demand for the government’s offerings.
The government exceeded its target of GHS 1,767 million, and despite the high demand, returns on the Treasury Bills remain negative due to Ghana’s current inflation rate of 52.8% as of March 2023. The government accepted all bids tendered for the 91-day and 182-day Treasury Bills, which received bids worth GHS 1,293 million and GHS 422 million, respectively. Meanwhile, the 364-day Treasury Bill received bids worth GHS 140 million, with the government once again accepting all bids tendered.
The highest interest rate offered by primary dealers was 19.6% for the 91-day, 22.2% for the 182-day, and 26.9% for the 364-day Treasury Bill. This high interest rate reflects the risk associated with investing in Ghana’s debt market, particularly given the country’s precarious economic situation.
Despite the government’s success in securing additional funding through the issuance of Treasury Bills, Ghana’s public debt remains a cause for concern. The country’s debt-to-GDP ratio currently stands at over 100%, indicating that the government’s debt load is becoming increasingly unsustainable.
Furthermore, the government’s plan to issue another round of 91-day, 182-day, and 364-day Treasury Bills on April 14, 2023, seeking to secure GHS 1,666 million in fresh funding to meet its short-term financing needs, is likely to further increase the country’s public debt.
This situation is not unique to Ghana, as many other emerging markets have faced similar challenges in recent years. However, Ghana’s high inflation rate and large debt load make it particularly vulnerable to economic shocks, and it will be crucial for the government to implement sound fiscal policies to address these challenges.
Despite these challenges, the strong demand for Ghana’s short-term debt instruments is a positive sign for the country’s economy, indicating that investors remain interested in the government’s offerings despite the associated risks. Moving forward, it will be important for the government to strike a balance between meeting its financing needs and managing its debt load in a sustainable manner.
