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The Head of Finance at UMB Capital, Nelson Cudjoe Kuagbedzi, has called on the government to provide clarity on its borrowing strategy in the medium term following a noticeable drop in Treasury bill rates.
Speaking on The MarketPlace hosted by Daryl Kwawu, Mr Kuagbedzi expressed concerns about the recent sharp decline in interest rates.
"The sharp drop in recent weeks shows a lack of appetite by the government to borrow from the short-term market," Mr Kuagbedzi said.
In the last Treasury bill auction, interest rates dropped to 15%, reflecting a significant reduction in demand for these short-term government securities. Despite this decline, the government recorded a 12 per cent over-subscription in terms of investor bids.
Economists have warned that this trend could pose economic risks, especially as it appears to diverge from other key economic indicators.
One of these experts, Dr Priscilla Twumasi Baffour, pointed out that the reduction in treasury bill rates is not in line with inflation and the Monetary Policy Rate (MPR), which remain key benchmarks in the country’s economic outlook.
“The reduction is not in sync with other key economic indicators such as inflation and the Monetary Policy Rate,” Dr Twumasi Baffour said.
In response to these concerns, Mr Kuagbedzi emphasised the need for the government to address the market distortions and align its borrowing strategy with the broader monetary policy objectives.
He stressed that for the country’s fiscal and economic indicators to align, the government's borrowing strategy must be consistent with these broader goals.
"Government’s borrowing strategy must align with monetary policy objectives so that other economic indicators fit in," he said.
Recent data from the Ghana Statistical Service shows that annual consumer inflation eased to 23.1% in February 2025, down from 23.5% in January. This decline is partly attributed to a more stable exchange rate.
However, the Monetary Policy Rate remains at 27.00%, which adds to the concerns about the mismatch between Treasury bill rates and other economic indicators.
Mr Kuagbedzi warned that if treasury bill rates continue to decline without addressing the market distortions, investors could shy away from government securities in search of more profitable investment opportunities.
"Currently, investors are at risk of negative real rates of return. They will always seek better returns on investments, especially when it comes to government securities. If this continues, it could impact pension fund managers, banks, and insurance companies, who heavily rely on these investments," he explained.
The impact of this trend could also affect the government's ability to raise necessary funds in the short term to refinance maturing obligations.
Looking ahead, the government is set to borrow GH¢6.14 billion on the treasury market on Friday, March 21, 2025.
The funds will be raised through the issuance of 91-day, 182-day, and 364-day Treasury bills to cover GH¢5.90 billion in maturing bills. This upcoming issuance is lower than the GH¢8.77 billion raised earlier in the week on Monday, March 17, 2025.
Analysts predict that yields will likely continue on a downward path, although a slowdown in the compression of rates to the 100–200 basis points range is expected.
As the government prepares to raise funds to meet its obligations, the need for clear communication regarding its borrowing strategy remains critical to maintaining investor confidence and overall economic stability.

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