In August, the Ghanaian government significantly increased its borrowing through treasury bills, raising over GH¢23 billion (GH¢23,053.39), a sharp rise compared to GH¢15.75 billion in July, GH¢16.7 billion in June, and GH¢15.7 billion in May.
This represents a 46.5% increase from July’s borrowing, amounting to over GH¢7.3 billion more. However, despite this substantial borrowing, the government still fell short of its target of GH¢26.29 billion for the month of August, indicating the huge borrowing appetite.
The steep increase in borrowing during August raises concerns about the government’s commitment to maintaining fiscal discipline in the year’s second half. The Ghanaian economy is gradually recovering from nearly four years of severe instability, marked by record-high inflation, unsustainable debt levels exceeding 100% of GDP, and a steep devaluation of the local currency, which had dropped to GH¢16 per dollar.
While inflation has decreased to 20.9% and debt levels have dropped to 70% of GDP, the cedi has recently depreciated again, now trading at over GH¢16.40 to the dollar. With international markets inaccessible and the Ghana Cocoa Board struggling to secure its traditional syndicated loan, any economic shocks could undermine the modest progress made so far.
Despite the government’s repeated commitments to prudent spending, the sharp increase in treasury bill borrowings in August is beginning to raise concerns. Although Ghana is currently under an International Monetary Fund (IMF) programme, the next assessment is not expected until the end of December this year. This could give government some leeway to take its leg off the pedal.
In the final auction of August, the government borrowed just over GH¢4 billion and raised interest rates across all three treasury bill instruments. The 91-day bill increased from 24.78% to 24.89%, a rise of 11 basis points. The 182-day bill saw an increase from 26.68% to 26.78%, a 10-basis point rise, while the one-year note climbed from 27.81% to 27.91%, also a 10-basis point increase.
The increase in the rates could lead to an increase the Ghana Reference Rate (GRR) for September. The GRR, which stood at 28.84% in the month of August, is the base rate on which banks add their margins to set lending rates. The GRR is calculated based on the 91-day treasury bill, the interbank overnight rate and the Bank of Ghana’s policy rate.
