Gov’t project plans for debt issuance, sustaining itself in the domestic market

Treasury bill, which is a short-term security on the domestic market, has become the major source of haven for revenue generation on the domestic market for the Central Bank of Ghana and Government.

Despite meeting its target auctions in its recent auction and in the past weeks, the Central Bank of Ghana continues to put in measures to raise much more revenue in a future date.

Future plans for debt issuance (treasury bill auction) by the Government is to raise a sum of GHC 3.79 billion, which can be used to fund daily operations and meet the short-term requirements of the government, hence, to reduce the overall fiscal deficit of the country – demonstrating the government’s dedication to effectively manage its financial obligations.

Regardless the hope of government to raising large sums of money from the domestic market to finance its activities, there is a challenge and risk to be faced by the economy as debt management may become difficult and interest rates may increase if huge sums of funds (which is a debt to government) are raised quickly from the local market.

Hence, in order to ensure advantageous financing terms from the national market, the government, together with the Central Bank of Ghana will need to carefully assess market conditions and put into place great fiscal policies that will not lead to the detriment of the economy facing hurdles.

More so, not just putting across great fiscal policies will be the solution to sustaining itself on the national market, but attaining favorable borrowing terms and achieving the required money for the government’s financial responsibilities will depend on how the government manages its borrowing needs in relation to market conditions, interest rate fluctuations, and the implementation of effective debt management methods.

Auction Goal

The current treasury bill auction held on Friday, June 9, 2023 saw the government surpass its target, showcasing its capacity to attract investors interest.

The government had to deal with high average interest rates despite accomplishing this feat, underscoring the expense involved in raising money through the auction.

However, the government is getting ready to raise more money in the upcoming week to pay for emergency expenses.

The Central Bank’s primary goal and initial target for the treasury bill auction was GHS 2.63 billion. Nonetheless, the auction proved to be highly successful, as the government managed to raise a total of GHS 2.79 billion, exceeding the target by GHS 168 million.

This result demonstrated a high level of investor interest in Ghanaian government assets, demonstrating optimism about the future of the economy.

Government in its quest to raise revenue from the internal market faced challenges. The average interest rate cost for the auction was 24.3%, which indicated that the government needed to offer competitive rates to attract investors. The interest rates for the specific treasury bill maturities were as follows: the 91-day bill was issued at 21.2%, the 182-day bill at 23.9%, and the 364-day bill at 27.8%.

For each maturity, the government accepted all offers, demonstrating its readiness to meet investor demand and ensure effective and profitable debt issuances.