T-Bills: Gov’t exceeds auction target by GHS 1.1bn

Ghana’s recent success in its Treasury Bill auction highlights the growing trend across the African continent for governments to turn to domestic markets for funds amid the ongoing economic challenges posed by the COVID-19 pandemic, the Russia-Ukraine war, and the shutout from the international debt markets.

The recent auction, which raised a total of GHS 3,878 million, exceeded the planned target of GHS 2,775 million by GHS 1,103 million. However, the higher-than-planned credit came at a cost to the government, with interest rates on the 91 and 182 day T-Bills coming in at 20.7% and 23.5% respectively, reflecting the current challenging economic environment in Ghana.

Despite this, the government has set an ambitious target of raising GHS 3,206 million in its next auction by issuing 91, 182, and 364 day T-Bills, indicating a continued desire to raise funds from the debt markets, potentially to finance various government initiatives and projects.

While borrowing from domestic markets may be necessary to meet the immediate liquidity needs of African governments, it is crucial to balance this with the long-term economic sustainability of their countries. High levels of debt can limit the capacity of governments to fund other essential sectors such as health, education, and infrastructure, which are crucial for sustainable economic growth and development.

Furthermore, policymakers must ensure that borrowed funds are invested effectively and borrowing costs are managed to prevent an over-reliance on debt. High borrowing costs can negatively impact the government’s ability to finance its debt obligations, leading to debt distress and potentially harming economic growth.

As such, African governments must prioritize sustainable investments that promote economic growth and job creation, rather than relying solely on borrowing to finance short-term needs. This will help to promote economic stability, job creation, and improve the standard of living for the people of Ghana and the wider African continent.