Interest costs on government of Ghana Treasury bills continue to decline, falling by about 0.10% last week as government is bent on reducing domestic interest payments.

According to the latest auctioning by the Bank of Ghana, government exceeded the target by 7.8% percent.

Per the figures from the Bank of Ghana, government’s policy of reducing its interest costs this year is achieving results.

This comes despite recording under-subscription of the short term securities in some sales.

Both the 91-day and 182-day Treasury Bills recorded a 0.1% fall respectively in interest costs.

According to the results, government secured a little above ¢642 million, as against a target of ¢596 million. Chunk of the sale came from the 3-months bill as ¢533.8 million was mobilized at an interest rate of 12.42%.

Senior Economic Analyst at Databank Research, Courage Martey told Joy Business the declining trend in interest rates is good for the government because it would enable it to achieve its target of reducing interest payments by ¢3.3 billion as envisaged in the Mid-Year Budget Review.

“But at the same time, we see government continue to accept auctioning’s above the weekly targets. We think the idea behind this is because government may be seeking to build cash buffer to support liability management and budget deficit financing, instead of just rolling over maturing bills”, he explained.

“However, it also appears that government remains committed to lowering the cost of debt because even when subscription exceed target, government could reject those amounts which quoted higher interest rates than the government is willing to pay. So in effect, we see that the government is combining liability management effectively with budget funding”, he added.

Sale of Treasury bills has gradually been returning to pre Covid-19 levels as investor interest picks up.

It also suggests that liquidity on the interbank market may be growing albeit slowly, indicating some appreciable level of cash in circulation.