The Ghanaian government has secured GH¢4.4 billion through the sale of treasury bills, exceeding its target of GH¢3.98 billion by 11%. However, this achievement came at a higher cost, as the government had to raise interest rates to attract investor interest.
For the second consecutive week, the government borrowed less compared to August and September figures but increased interest rates to encourage the purchase of treasury instruments. The 91-day bill’s interest rate rose from 25.94% to 26.19%, reflecting a marginal increase of 25 basis points. Similarly, the 182-day bill’s rate increased from 27.03% to 27.29%, a 26 basis point rise, while the one-year note moved from 28.73% to 28.97%, a 24 basis point increment.
Despite the over-subscription and rising interest rates, the cautious approach of investors highlights their wariness in lending to the government. This trend has seen marginal increases in rates even as the government has scaled back from the heavy borrowing witnessed in August and September.
The rise in interest rates contrasts with the Bank of Ghana’s decision to lower its policy rate in September, the first reduction in about eight months. This divergence has sent mixed signals to the investment community, with concerns that the higher borrowing costs might reflect ongoing economic challenges.
However, a positive development for investors is the government’s reduced borrowing volume. This reduction allows banks to have more room to lend to the private sector, potentially easing the crowding out effect that has made it difficult for businesses to access much-needed capital.
In recent months, treasury bills have become the government’s primary borrowing tool following the near-collapse of the bond market due to the country’s debt restructuring program. Finance Minister Dr. Mohammed Amin has expressed optimism that the bond market will eventually recover, with renewed interest from foreign investors expected once the majority of debt restructuring programs are completed.
This recovery could pave the way for a more balanced borrowing strategy, restoring investor confidence and providing an alternative to the heavy reliance on short-term treasury bills
Source:thehighstreetjournal.com