T-Bill share of banks’ investment portfolio leap from 17.8% to 51% as DDEP reshapes country’s investment landscape
The Bank of Ghana’s September 2023 Monetary Policy Report reveals a dramatic transformation in the investment landscape of the country’s banking sector. Per the report, Treasury bills (T-bills) have surged to prominence, now constituting the largest share of banks’ investment portfolios. This seismic shift has seen the share of T-bills skyrocket from a modest 17.8% in August 2022 to a commanding 51% in August 2023.
The sharp ascent of T-bills can be attributed to a curtailment in trading activity within the medium-to-long term instruments category, driven primarily by the Domestic Debt Exchange Programme. Consequently, the once-dominant long-term securities have seen a staggering decline, falling to a mere 48.8% from their lofty perch at 81.9% during the same period last year.
Equity investments, meanwhile, have remained on the fringes, with their share in the investment portfolio modestly moderating from 0.3% to 0.2% during the period under review.
Total investments have witnessed a substantial uptick, reaching ¢97.1 billion in August 2023, representing a remarkable growth of 19.9% compared to the meager 0.8% expansion observed in August 2022. This resurgence is largely attributed to banks’ continued asset portfolio rebalancing, which now favors short-term investments, a trend initiated by the Domestic Debt Exchange Programme (DDEP) and the revision of the Cash Reserve Ratio.
The shift towards short-term investments has been nothing short of seismic, with short-term investments surging by a remarkable 242.6% in August 2023, following a sharp contraction of 38.2% in August 2022. In stark contrast, long-term investments, particularly securities, have faced a daunting contraction, plummeting by 28.6% from a buoyant growth of 16.9% during the same reference period.
Consequently, the share of investments within the broader context of total assets has seen a marginal uptick, edging up to 39.7% in August 2023 from its previous position of 39.6% in August 2022.
In summary, Ghana’s banking sector is undergoing a momentous transformation, with Treasury bills taking center stage as the dominant investment choice for banks. The surge in T-bills is a direct consequence of factors like the Domestic Debt Exchange Programme, which has reshaped the investment landscape and ushered in an era of short-term investment dominance, while the once-mighty long-term securities have receded into the background.
