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. 

Other 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.

Ministry’s perspective

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. 

Market watchers

Financial analysts view the development as particularly encouraging, given Ghana's recent history of high interest rates that have strained both public finances and private sector growth. 
Market observers are now watching closely to see if the positive momentum can be sustained in the coming months, as continued rate reductions could play a crucial role in Ghana's broader economic stabilisation efforts.

The government faces the challenge of balancing debt reduction, with investments required to stimulate growth in key sectors of the economy.

Economist and Lecturer at the Academic City University, Eugene Bawelle, told the Daily Graphic in an earlier interview that the steady oversubscription on the market was due to the limited investment portfolios available to investors. 

He said that after the Domestic Debt Exchange Programme (DDEP), the secondary market no longer existed, leaving investors with few options.

Mr Bawelle explained that the new government might also be enjoying some goodwill from investors and that if the goodwill was maintained, then rates were expected to drop further down in the coming weeks.

Mr Bawelle said it was, however, important that the positive effects of the lower rates trickled down and impacted lending rates in the country.

“The drop in the T-Bill rates is positive, as it reduces the government's debt servicing costs, which is particularly important for Ghana, given its recent debt challenges,” the economist and lecturer at Academic City said.

The drop in T-Bill rates is coming at a time when a recent survey by accounting and advisory firm, KPMG, indicates that treasury bills remained the most preferred investment option, with 39 per cent of respondents opting for the low-risk instruments.

Fixed or term deposits closely follow at 25 per cent, further reinforcing the cautious approach among many Ghanaians, who prioritise stability and guaranteed returns amid economic uncertainty.

However, the report said there were signs of gradual diversification in investment choices. 

Mutual funds, selected by 23 per cent of respondents, are gaining traction as a medium-risk option offering balanced returns.

Additionally, commodities such as precious metals and agricultural products accounted for 20 per cent, which demonstrated a growing appetite for alternative investments as a hedge against inflation and economic instability.

The survey also points out that higher-risk instruments such as stocks (19 per cent) and bonds (nine per cent) remain underutilised, pointing to limited confidence.

Background

Ghana's Treasury bill (T-bill) market has been a critical component of the country's financial system, serving as both a monetary policy tool and a government financing mechanism.

Over the past decade, Ghana has experienced significant volatility in T-bill rates, often reflecting broader economic challenges, including inflation pressures, currency depreciation and fiscal imbalances.

The auctions also serve as a key benchmark for interest rates across the economy and strongly influence the lending rates of commercial banks.

The central bank uses these instruments to implement monetary policy, manage liquidity in the banking system and help finance government operations.

Historically, Ghana's T-bill rates have been among the highest in Sub-Saharan Africa, reflecting persistent macroeconomic challenges.