Gov’t to borrow GHS 3.33 bn from treasury market to refinance maturities; settle pension bond coupon payments

Government is set to borrow a staggering ¢3.33 billion from the treasury market this coming Friday, May 12, 2023. This sum is expected to be partly used to refinance maturities worth ¢2.31 billion.

Sources have also revealed that a portion of the amount will be used to settle coupon payments of pension bondholders. This is expected to be the largest issuance so far this year and will be issued via the 91-day, 182-day, and 364-day Treasury bills.

It is worth noting that analysts are predicting that investors will bid higher yields on liquidity squeeze, especially as inflation data for April 2023 is expected to be released on May 10, 2023. While this may be a cause for concern, the $750 million loans recently approved by the Ghanaian parliament may help slow down the rise in money market yields.

However, the cost of borrowing remains a concern to many analysts and market watchers. The T-bill auction held on Friday, May 5, 2023, was oversubscribed, as the treasury raised ¢2.57 billion, exceeding the gross target by 40.01%.

According to the auction held by the Bank of Ghana, the government accepted a significant ¢2.56 billion from the bids submitted by the investors, largely the banks. It is noteworthy that majority of the bids came from the 91-day T-bills as ¢1.62 billion were tendered, and all the bids were consequently accepted.

Similarly, almost all the ¢380.75 million of bids submitted for the 182-day T-bills were accepted. The oversubscription of the T-bills auction, despite the high borrowing cost, reflects investors’ confidence in the Ghanaian economy and the government’s fiscal policies. It is hoped that the government will continue to implement measures to sustain economic growth and reduce the country’s debt burden.

Source:  norvanreports