The government successfully raised GH¢5.8 billion, surpassing its borrowing target of GH¢5.6 billion by 3.6%. However, this achievement came at a cost, as interest rates on treasury instruments had to be increased, continuing a trend seen in recent weeks.
The 91-day treasury bill now carries an interest rate of 26.82%, up from 26.56%, while the 182-day bill has also risen to 26.82%, from the previous 26.56%. Additionally, the one-year note increased slightly to 29.12%, compared to 29.03% previously.
These rising rates are likely to impact lending rates across the economy, as lenders often peg their rates to the 91-day bill. For the government, the cost of borrowing is escalating just as it is wrapping up its debt restructuring programme.
Earlier in the year, interest rates on treasury bills had shown signs of decline after an initial surge. However, recent weeks have seen consistent rate hikes as the government strives to meet its borrowing targets. This increase is likely a response to the country’s inflation, which has recorded its second consecutive rise, now standing at 22.1%. The inflation spike is reducing the real interest rates on these instruments, making it necessary for the government to offer higher returns to attract investors.
Despite these higher rates, investor confidence in government instruments remains low, with most opting for shorter-term securities. The 91-day treasury bill accounted for a staggering 90.8% of the total amount raised, while the one-year note only made up 2.7%—one of the lowest in recent times. The heavy reliance on shorter-term borrowing puts pressure on the government’s finances, as it must repay the borrowed funds more quickly.
Looking ahead, the Bank of Ghana’s Monetary Policy Committee is set to hold its final meeting of the year later this month. With inflation rising and treasury bill rates continuing to surge, the Committee may opt to maintain the policy rate at 27%. Any increase, especially after a reduction in the last meeting, could signal indecision from the central bank.
