Ghana’s domestic Treasury money market has continued to experience persistently high yields since January 2023, with no signs of easing despite fluctuations throughout 2024.
These elevated rates are primarily attributed to strong investor demand and the government’s growing reliance on short-term borrowing to meet its financing needs following the domestic debt restructuring program (DDEP). The situation reflects the ongoing economic uncertainties that have shaped government borrowing strategies over the past year.
As of January 20, 2025, short-term Treasury bills continued to see modest increases in yields, with the 91-day bill rising by 8 basis points to 28.42 percent and the 182-day bill increasing by 1 basis point to 28.97 percent. Meanwhile, the 364-day bill saw a larger jump, with its yield climbing by 11 basis points to 30.29 percent. These elevated rates, while high, have not deterred investor interest. In fact, a recent auction saw record-breaking demand, with bids reaching GH¢8.8 billion against a target of GH¢6.35 billion. The government accepted the full amount, marking the largest auction size in Ghana’s history, signaling the market’s confidence in short-term government securities despite the higher returns.
One factor contributing to this robust demand is the high inflation rate, which stood at 23.8 percent in December 2024. The prevailing monetary policy rate of 27 percent also suggests that real interest rates remain positive at around 5 percent, offering a measure of security for investors. This has allowed the government to frontload its 2025 financing requirements, taking advantage of continued investor appetite for short-term instruments. The Treasury plans to raise GH¢6 billion in its upcoming January 24 auction, with expectations for oversubscription given the ongoing demand.
The situation is a continuation of the trend seen in 2024. At the start of the year, Treasury bill yields had briefly dipped due to a reduction in inflation, which dropped to 23.2 percent in December 2023. However, despite this decline, the yields remained close to 30 percent, with the 91-day bill falling to 29.04 percent, the 182-day bill to 31.52 percent, and the 364-day bill to 32.08 percent. Even during this period of modest yield compression, investor demand remained strong, underscored by an oversubscription rate of 47 percent at an auction that saw GH¢3.86 billion in bids.
The landscape in early 2023 was even more volatile, as the government faced a severe inflationary shock, with inflation spiking to 54.1 percent in December 2022. In response, yields on short-term bills soared to as high as 35.46 percent for the 91-day and 35.92 percent for the 364-day bills, as investors flocked to Treasury securities for safety amid economic instability. While yields temporarily dropped as low as 15 percent by March 2023, driven by government efforts to reduce borrowing costs, the strategy proved unsustainable. The limited ability to tap into international capital markets, combined with the need to refinance domestic debt following the debt restructuring, led to the return of high yields.
The high-yield environment has become entrenched as a defining feature of Ghana’s Treasury market, exacerbated by the limited access to international capital and the need for short-term financing options. The government’s increasing reliance on short-term securities has allowed for continuous funding but at the cost of rising interest payments. In the short term, the high yield trend is expected to persist through the first quarter of 2025, driven by both investor confidence and macroeconomic realities. The market’s focus remains on short-term debt as long as economic uncertainties continue to loom large.
Looking ahead, the government has indicated plans to reduce its reliance on money market funding and explore longer-term securities later in 2025. However, Databank forecasts that government borrowing from the Treasury bill market will remain substantial, with an expected GH¢200 billion to be raised in 2025, slightly lower than the GH¢220 billion raised in 2024. The weekly average uptake is projected to be around GH¢3.9 billion, down from GH¢4.2 billion, but this remains significant given the government’s ongoing refinancing needs.
At the same time, there is the expectation that the Bank of Ghana’s Monetary Policy Committee (MPC) will likely raise the policy rate during its January 2025 meeting to tackle persistent inflation. Some analysts predict a 200 basis point hike to stabilize inflation and restore macroeconomic stability. This potential rate hike could further influence the yield curve and shape investor sentiment, adding another layer of complexity to Ghana’s economic recovery process.
In conclusion, Ghana’s Treasury market remains defined by high yields, strong demand, and investor confidence despite ongoing macroeconomic challenges. As the government faces increasing borrowing costs and a need to finance its deficits, the reliance on short-term securities is likely to continue. However, with a potential shift toward longer-term financing on the horizon, the market’s landscape could begin to evolve by mid-2025, particularly if inflationary pressures subside and investor confidence in the broader economy grows.