Investor confidence in Ghana’s fixed-income market is expected to grow in 2025, fueled by declining Treasury bill (T-bill) yields and improving macroeconomic conditions. This follows a year of gradual recovery in 2024, during which the government made significant progress in stabilizing its fiscal position and rebuilding trust in the domestic bond market.
According to Databank’s fixed-income outlook for 2025, a continued recovery is forecast, driven by a cautious return of foreign investors and a strategic shift by the government toward longer-term securities.
As of last week, yields on T-bills remained high, with the 91-day bill at 27.36%, the 182-day bill at 28.1%, and the 364-day bill at 29.88%. The report underscores that the compression of T-bill yields will be critical to the market’s ongoing recovery.
Databank also points to easing monetary policy and a reduction in inflationary pressures as key factors that will likely create a more favorable environment for lowering borrowing costs in the coming year.
Shift Toward Longer-Term Securities and Reduced T-Bill Borrowing
For 2025, the government plans to borrow about GH¢200 billion from the T-bill market, a reduction from the estimated GH¢220 billion in 2024. This indicates a decrease in the average weekly uptake of T-bills, from GH¢4.2 billion in 2024 to GH¢3.9 billion in 2025.
The lower reliance on short-term borrowing will be supported by better access to alternative funding sources and the continued recovery of key macroeconomic indicators. Treasury demand for money market funding is expected to significantly decline, helping to lower T-bill yields, with momentum for this shift likely accelerating after the first quarter of 2025.
Policy Changes and Domestic Bond Market Reopening
Databank notes that while a dovish monetary policy outlook will initially slow the response to T-bill yield compression, key policy changes are expected to help reduce borrowing costs. These include a shift away from short-term money market funding and a stronger focus on longer-term financing options. Current T-bill yields, hovering at around 27%, will likely come down as a result of these efforts.
The government’s plan to reopen the domestic bond market to non-resident investors by 2025 is seen as a pivotal step in accelerating economic recovery. This move follows the successful completion of Ghana’s Domestic Debt Exchange Programme (DDEP) in September 2023, which was crucial in restoring investor confidence.
Reopening the Bond Market and Boosting Investor Confidence
Samuel Arkhurst, Director of Treasury and Debt Management at the Ministry of Finance, emphasized that reopening the bond market aligns with Ghana’s broader fiscal strategy and reinforces confidence in the country’s economic prospects. Arkhurst pointed out that the last bond issuance was in September 2022, prior to the DDEP’s launch in January 2023, with the restructuring process completed by September 2023.
Typically, countries that undergo debt restructuring require two to four years to regain access to their domestic bond markets. However, Ghana’s ability to reopen its market in just two years reflects the government’s determination to accelerate its recovery.
Sovereign Ratings and Market Outlook
In 2024, the restructuring of Eurobonds contributed to modest improvements in Ghana’s sovereign credit ratings, with Fitch upgrading the country to CCC+ and Moody’s to Caa2. These upgrades, along with a reduction in inflation and a 300-basis-point cut in the monetary policy rate, have bolstered investor confidence in Ghana’s government securities.
Throughout 2024, money market instruments remained the dominant asset class in the Ghana Fixed Income Market (GFIM), offering higher returns than longer-dated securities. As fiscal and monetary policies stabilize further in 2025, Ghana’s fixed-income market is expected to attract more investor interest, positioning the market for continued growth.
