Interest rate drop key to govt’s debt strategy

Ghana’s declining interest rates are playing a key role in the government’s debt management strategy, according to Oforiwaa Attipoe, Manager of Global Market Sales for Ghana at Stanbic Bank. 

Speaking in an interview with CNBC Africa on Ghana’s fixed income and foreign exchange (FX) market trends, she emphasized that the sustained drop in interest rates has created opportunities for strategic debt refinancing and cost reduction.

Since the beginning of the year, Ghana has seen a consistent downward trend in interest rates, a pattern that has continued under the country’s new administration. 

The latest treasury bills (T-bills) auction attracted unprecedented investor interest, with total bids reaching an all-time high of GH¢20.49 billion, marking a 140.5% oversubscription rate. 

Despite this overwhelming demand, the government accepted only GH¢9.634 billion in bids, reflecting a calculated approach to managing borrowing levels.

Year-to-date, the government has successfully raised approximately GH¢65 billion through weekly T-bill auctions. Interest rates for different tenors have witnessed a notable decline, dropping by about 4% across the board. Currently, the 91-day T-bill is trading at approximately 20.7%, the 182-day at 22.9%, and the 365-day at 22.6%. 

The government's concerted debt management strategy, aimed at reducing borrowing costs, has been a key driver of this trend.

Investor preference has increasingly leaned towards shorter tenors due to the lack of alternative high-yield investment options in the financial markets. 

Despite the overall drop-in interest rates, the 365-day T-bill remains particularly attractive, trading at around 27.9%. 

Investor resistance

Speaking on the potential investor resistance should rates continue to decline, Madam Attipoe noted that “demand for T-bills within the 91 to 364-day range remains robust, owing to the still-competitive yields.”

Beyond the fixed income market, Ghana’s foreign exchange (FX) market has also drawn attention. 

The cedi’s performance has been influenced by a mix of domestic and external factors, including inflation trends, interest rate movements, global commodity prices, and monetary policy decisions. So far, the local currency has remained relatively stable, experiencing minimal volatility. 

The year-to-date depreciation stands at approximately 3.98%, with the cedi currently trading at 15.58 per U.S. dollar, compared to an initial value of 14.85 at the start of the year.

The stability of the cedi, according to Oforiwaa Attipoe, “Can be attributed, in part, to the Bank of Ghana’s market interventions, which have amounted to $994 million. 

These efforts have helped cushion the local currency against excessive depreciation and ensured a level of confidence among market participants.”

Ghana’s recent T-bill auction and FX market trends underscore a strategic shift in economic policy aimed at fostering stability, reducing borrowing costs, and bolstering investor confidence. 

As the government continues to refine its monetary and fiscal policies, market participants will be keenly watching how these developments unfold. 

The coming months will be critical in determining whether the current strategies will yield the intended results of inflation control, sustained investor confidence, and overall economic resilience.

• The writer is the Sales Manager, Global Markets of Stanbic Bank Ghana