T-Bills borrowing cost spikes to GHS 4bn dependency grows
The Government of Ghana’s reliance on Treasury bills (T-bills) for borrowing has been a topic of concern in recent times.
According to recent data, the interest cost on Government of Ghana T-bills for the last three months (December 2022, January 2023, and February 2023) is estimated at ¢4.416 billion. This figure represents a significant increase in borrowing costs compared to previous periods.
The government’s borrowing from the T-bills market has been substantial, with a total of ¢33.08 billion worth of T-bills purchased in the last three months. These instruments were sold by the government at an average yield of 35%, indicating the high cost of borrowing in Ghana’s current economic climate.
In December 2022, the government secured ¢12.60 billion at an interest rate of 35.72%. However, in January 2023, the government reduced its appetite for the short-term securities, mobilizing only ¢7.3 billion at a rate of 35.66%.
Surprisingly, in February 2023, the government’s borrowing from T-bills significantly shot up to ¢13.1 billion at an interest cost of 35.50%. This sudden increase in borrowing from the T-bills market has raised concerns among experts, with some questioning the government’s borrowing strategy.
The Executive Director of finance firm Dalex, Joe Jackson, has also expressed concerns about the government’s borrowing practices. In a tweet, he asked whether individuals should be cautious in buying T-bills, given the high borrowing costs associated with these instruments.
It is worth noting that the government’s borrowing from the treasury market seems to be its only source of borrowing for now. This reliance on the T-bills market could be attributed to the government’s difficulty in securing loans from international lenders due to the country’s high debt-to-GDP ratio.
However, this strategy could be risky in the long run, as the government’s borrowing costs continue to increase, putting a strain on the country’s finances. It is therefore essential for the government to consider alternative borrowing sources and strategies that will reduce the country’s dependence on T-bills.
In light of this, the government has announced plans to borrow ¢2.78 billion from the T-bills market this week to refinance maturing bills worth ¢2.55 billion. This move may alleviate some of the concerns raised by experts about the government’s reliance on T-bills.
However, it remains to be seen whether this will be enough to address the underlying issues affecting Ghana’s borrowing practices.
Ghana’s increasing reliance on T-bills for borrowing has raised concerns among experts, given the high borrowing costs associated with these instruments.
The government must explore alternative borrowing sources and strategies to reduce the country’s dependence on T-bills and address the underlying issues affecting its borrowing practices.
