Introduction

In a significant move to address its short-term financing needs, the
Government of Ghana has announced plans to raise approximately
GH¢7.5 billion through the sale of Treasury Bills
(T-Bills) in the upcoming auction. This development, confirmed by a
Bank of Ghana notice issued on behalf of the government, signals a
substantial increase in borrowing activity and underscores the
country’s ongoing fiscal challenges. The auction, designated as Tender
1989, targets 91-day, 182-day, and 364-day Treasury Bills, with a
total issuance goal of GH¢7.56 billion. This amount
represents a 90% increase compared to the previous
auction held on January 2, 2026, which had a target of GH¢3.99 billion.

This article delves into the details of this auction, analyzes the
implications for the Ghanaian economy, and provides practical insights
for potential investors. We will explore the background of Ghana’s
debt strategy, the mechanics of the Treasury Bill market, and what
this means for both domestic and international stakeholders.

Key Points

Background

Understanding Treasury Bills in Ghana

Treasury Bills are short-term debt instruments issued by the
Government of Ghana to finance its budget deficit and manage short-term
liquidity. They are considered one of the safest investment options in
the country, backed by the full faith and credit of the government.
T-Bills are sold at a discount to their face value and redeemed at par
upon maturity, with the difference representing the investor’s return.

The Bank of Ghana (BoG) acts as the fiscal agent for the government,
conducting regular auctions to issue these securities. The frequency
and scale of these auctions are influenced by the government’s
financing needs, monetary policy objectives, and market conditions.

Ghana’s Fiscal Landscape

Ghana has been grappling with fiscal challenges in recent years, driven
by a combination of factors including declining revenue mobilization,
rising public expenditure, and the economic impact of external shocks
such as the COVID-19 pandemic and the Russia-Ukraine conflict. These
challenges have led to an increased reliance on domestic and external
borrowing to bridge the fiscal gap.

The government’s debt-to-GDP ratio has been a subject of concern for
both domestic and international observers. While domestic borrowing
through instruments like Treasury Bills helps reduce reliance on
external debt, it also increases the burden on the domestic financial
system and can lead to higher interest rates.

Analysis

Why the Sharp Increase in Borrowing?

The 90% increase in the Treasury Bill target from GH¢3.99 billion to
GH¢7.56 billion is a clear indication of the government’s heightened
short-term financing needs. Several factors may be contributing to this
surge:

• Seasonal Expenditure Patterns: The beginning of the
  year often sees increased government spending on various programs
  and projects, requiring additional liquidity.
• Debt Servicing Obligations: The government has
  significant debt servicing commitments, both domestic and external,
  which require regular cash flows.
• Economic Recovery Measures: The government may be
  ramping up spending to support economic recovery and stimulate
  growth, particularly in key sectors such as agriculture, education,
  and infrastructure.
• Revenue Shortfalls: If actual revenue collections
  fall short of projections, the government may need to increase
  borrowing to meet its expenditure targets.

Implications for Interest Rates and Inflation

The increased supply of Treasury Bills in the market could have
implications for interest rates and inflation. A higher supply of
government securities can lead to upward pressure on yields, as
investors demand higher returns to absorb the additional debt. This,
in turn, can influence the cost of borrowing for the private sector,
potentially dampening investment and economic growth.

Additionally, if the increased borrowing leads to higher government
spending without a corresponding increase in revenue, it could
contribute to inflationary pressures. The Bank of Ghana would need to
carefully monitor these dynamics and adjust its monetary policy stance
accordingly.

Impact on the Financial Sector

The Treasury Bill market plays a crucial role in the functioning of
Ghana’s financial sector. Banks and other financial institutions use
these securities for liquidity management, collateral for borrowing,
and as a benchmark for pricing other financial instruments.

The increased issuance of T-Bills provides more investment opportunities
for financial institutions, but it also increases their exposure to
government debt. This could have implications for their risk profiles
and capital adequacy ratios, particularly if concerns about the
government’s fiscal sustainability persist.

Practical Advice

For Individual Investors

Treasury Bills are generally considered a low-risk investment option,
making them suitable for conservative investors seeking stable returns.
The current yields of 11.12% (91-day), 12.55% (182-day), and 12.33%
(364-day) are attractive compared to many other fixed-income
instruments available in the market.

However, potential investors should consider the following:

• Liquidity: While T-Bills are relatively liquid, they
  are best suited for investors with a specific investment horizon
  aligned with the maturity of the bill.
• Tax Implications: Interest income from Treasury Bills
  is subject to withholding tax, which reduces the effective return.
• Opportunity Cost: Investors should compare the
  yields on T-Bills with other investment options, considering their
  risk tolerance and investment objectives.

For Institutional Investors

Institutional investors, including pension funds, insurance companies,
and asset managers, often use Treasury Bills as part of their portfolio
allocation strategy. The increased supply of T-Bills provides more
opportunities for these institutions to diversify their holdings and
manage their liquidity positions.

However, institutional investors should also assess the following:

• Credit Risk: While T-Bills are considered low-risk,
  the overall fiscal health of the government is a factor to consider.
• Duration Risk: Changes in interest rates can affect
  the value of T-Bills, particularly those with longer maturities.
• Regulatory Requirements: Institutions must ensure
  that their investments in government securities comply with relevant
  regulatory requirements.

For Businesses

Businesses should be aware of the potential impact of increased
government borrowing on the cost of capital. Higher yields on
government securities can lead to higher interest rates on loans and
other forms of credit, increasing the cost of financing for businesses.

Additionally, businesses should monitor the government’s fiscal
policies and spending priorities, as these can influence economic
conditions and market demand for their products and services.

FAQ

Conclusion

The Government of Ghana’s plan to raise GH¢7.5 billion through Treasury
Bills reflects the ongoing challenges of managing the country’s fiscal
position. While this move provides the necessary liquidity to meet
short-term financing needs, it also underscores the importance of
implementing sustainable fiscal policies to reduce reliance on borrowing.

For investors, Treasury Bills offer a relatively safe investment option
with attractive yields. However, it is essential to consider the
broader economic context and potential risks before making investment
decisions.

As Ghana continues on its path of economic recovery and development,
the effective management of public debt will remain a critical factor
in ensuring long-term stability and growth. Stakeholders across the
economy must work together to support sound fiscal policies and foster
an environment conducive to sustainable development.