T-bill rates drop...As govt reduces domestic borrowing

07-03-2025

T-bill rates drop...As govt reduces domestic borrowing

Rates of the government’s primary borrowing instrument, the Treasury bill, have fallen sharply to their lowest levels in 20 months, signalling a reduction in the government’s appetite for borrowing from the domestic market. 

The benchmark 91-day bill rate eased to 20.79 per cent in the latest auction, down from 28.34 per cent in the last 50 days from last Friday.

This marks a significant milestone in the country's economic recovery, as the rate has not been this low since May 8, 2023, when it stood at 20.2 per cent.

The drop in the benchmark rate as a result of less government borrowing from the domestic market could also mean that access to credit by businesses and individuals can now be easier and cheaper.

The steady decline in interest rates is also good news because it means the government would now be raising funds at cheaper rates. 

The 182-day T-bill also went down from 28.96 per cent to 22.98 per cent, within the same period.

The 364-day T-bill plummeted from 30.17 per cent to 22.69 per cent. With the international capital market still closed to the country and the local bond market dormant after the debt restructuring, T-bills have become the government’s only source of raising money to finance its budget deficit.

In January, for instance, the government borrowed GH¢38.45 billion via treasury bills against the GH¢40.57 billion offered by investors.

Databank Research said it expected continued bid rejections to support yield compression in the weeks ahead.

T-bill rates in the country have been volatile since 2022.

After declining to an eight-year low of 19 per cent in March 2023, from 35.5 per cent at the end of 2022, the 91-day bills have been hovering between 22 per cent and 30 per cent. But since the beginning of this year, the rates have consistently dropped, while investor appetite remains strong.

Despite the drop in the rates, the government has been forced to consistently turn down bids due to oversubscription.

The 91-day bill has dropped from 27.77 per cent at the beginning of the year to 20.79 per cent as of today.

The 182-day bill and the 364-day bill have also declined from 28.49 per cent and 29.94 per cent to 22.9 per cent and 22.6 per cent, respectively.

Delivering the State of the Nation Address, President John Dramani Mahama said the continuing decline in T-bill rates signalled growing investor confidence in the country's fiscal management.

He said the downward trend followed the new administration's implementation of fiscal consolidation measures and streamlined governance practices since taking office on January 7, this year.

The Minister of Finance, Dr Cassiel Ato Forson, throwing more light on the development on his social media handles, said the total T-Bill bids received by the government since January 10, this year had been GH¢89.7 billion.

Out of the amount, the government accepted GH¢59.5 billion bids which were rollovers of debt inherited by the current government while rejecting GH¢30.2 billion bids, he said.

Therefore, Dr Forson added, the net borrowing by the Mahama government as of last Friday, stood at GH¢7.1 billion.

“This is primarily a buffer for servicing maturing debts accumulated by the New Patriotic Party/Akufo-Addo/Bawumia government,” Dr Forson said, adding, “It is instructive to note that actual debt accumulation under the Mahama government is virtually zero.”

The Finance Minister said the prudent public debt management measures adopted by the Mahama government had led to a record-high drop in the 91-day T-Bill rate in just 50 days, saying it was an emphatic vote of confidence in the Ghanaian economy by the investor community.

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