Ghana’s Treasury Bill Yields Hit 20-Month Low Amid Fiscal Consolidation Strategy

Treasury bill yields have continued their downward trend, reaching the lowest levels in 20 months, with average rates between 17% and 19%. The Bank of Ghana’s latest data highlights significant drops in yields: the 91-day yield fell by 307 basis points to 17.72%, the 182-day yield decreased by 401 basis points to 18.97%, and the 364-day yield dropped by 271 basis points to 18.98%. This decline reflects the government’s ongoing fiscal consolidation efforts and a strategic shift in its borrowing approach.

Despite the reduction in rates, the government exceeded its Treasury bill target, raising GHS 6.22 billion, surpassing the projected GHS 5.74 billion by 8.4%. Investor demand remained robust, with GHS 6 billion tendered for the 91-day bill alone. However, in a move to reduce borrowing costs, GHS 4.1 billion in high-interest bids were rejected. The government aims to raise GHS 8.26 billion in the upcoming auction, signaling continued demand for Treasury bills despite the declining rates.

The decline in Treasury bill rates is expected to ease the government’s debt servicing burden and help free up funds for development projects. This drop in yields aligns with the government’s goal of fiscal consolidation, which seeks to strengthen the country’s financial stability while reducing borrowing costs. However, the government is also exploring alternative funding sources to supplement its borrowing strategy.

While the falling yields could help improve the government’s financial position, Bank of Ghana Governor Dr. Johnson Asiama has warned that lower interest rates on Treasury bills could present risks to the local currency’s stability. The central bank is closely monitoring the situation and coordinating with the Ministry of Finance to ensure a balance between reducing borrowing costs and safeguarding macroeconomic stability.

SOURCE: CITI NEWSROOM