Deputy Ranking Member on Parliament’s Finance Committee, Dr. Gideon Boako, has criticized the Finance Ministry’s recent handling of Treasury bill (T-bill) rates, describing the reductions as artificial and unsustainable. In a Facebook post, he accused the government of manipulating T-bill rates for propaganda purposes, only for market forces to correct them. “When you advise the government, they won’t listen. But how do they feel now that their so-called ‘artificial’ drop in T-bill rates, engineered for propaganda, has been undone?” he wrote.
Recent developments in Ghana’s short-term instruments market appear to support his argument, as the first undersubscription of T-bills under the new government has been recorded. This marks a significant shift from previous weeks of oversubscription, where the government had been rejecting excess bids. The latest auction results from the Bank of Ghana reveal that while the government aimed to borrow GH¢6.14 billion, total bids from investors amounted to only GH¢4.7 billion, leading to a shortfall of GH¢1.4 billion, or 23%. Despite this, the government further rejected some bids, ultimately accepting only GH¢3.3 billion, which meant it fell short of its target by GH¢2.8 billion, representing a 46% shortfall.
This dip in investor interest coincides with another consecutive week of declining T-bill rates. The 91-day bill dropped from 15.86% to 15.73%, the 182-day bill saw a marginal decline from 16.92% to 16.92%, and the 364-day bill fell from 18.96% to 18.84%. This consistent drop in rates may be discouraging investors who are now seeking alternative instruments with better returns.
For the government, the situation presents both opportunities and risks. On the positive side, lower T-bill rates mean reduced borrowing costs, and a shift of funds away from government securities could redirect capital into the private sector, potentially boosting real economic growth. However, with the suspension of bond market activities due to the Domestic Debt Exchange Program (DDEP), the T-bill market remains the primary avenue for government borrowing. A continued decline in investor interest could make it more difficult for the government to raise funds for its operations.
Dr. Boako has highlighted the lack of coordination between fiscal and monetary authorities as a critical issue, arguing that the Finance Ministry’s approach to suppressing T-bill rates clashes with the Bank of Ghana’s monetary policy stance. This is evident in the central bank’s recent decision to raise the policy rate by 100 basis points from 27% to 28%, a move aimed at controlling inflation but one that directly contradicts the Finance Ministry’s effort to lower borrowing costs.
“The Finance Minister must take a cue: macroeconomic management is critical to national financial stability. The ongoing policy incoherence between the Finance Ministry and the Central Bank exposes a worrying lack of coordination,” he stated.
