Decline in T-Bill rates must be engineered smoothly to avoid destabilising FX market – Kwakye

Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has told Finance to ensure that the FX Market is not destabilised by the drop in T-Bills.

In a post on his X page, he said the decline in T-bill rates must be engineered smoothly to avoid destabilising the FX market.

His comments come at a time when The Minister of Finance, Dr. Cassiel Ato Forson, stated that the government was deliberately discouraging banks from over-relying on government securities to boost lending to the private sector.

According to him, the government’s decision to reject excess bids from the treasury bill sale is aimed at encouraging banks to provide more credit to businesses.

Speaking during an engagement with the youth on X Spaces with Kalyjay on March 9, 2025, ahead of the presentation of the 2025 budget, he said, “Banks will have to lend to the private sector if we keep rejecting the bids.”

The minister reaffirmed the government’s commitment to maintaining fiscal stability while creating a conducive environment for private sector growth.

Meanwhile, interest rates on treasury bills declined to 19% in the government’s recent auction on March 7, 2025. This marks the first time in 20 months that rates have dropped below 20%.

The demand for short-term instruments has surged recently, with the government consistently recording over 100% subscription rates.

In the latest auction, the government received bids totaling GH¢10.30 billion but accepted only GH¢6.221 billion, rejecting GH¢4.08 billion in bids.

Auction results released by the Bank of Ghana showed that the 91-day bills saw the highest demand, receiving a total of GH¢6.00 billion in bids.

The 182-day bill received bids worth GH¢2.894 billion, but only GH¢842.61 million was accepted.

Meanwhile, the 364-day bill received bids totaling GH¢1.40 billion, with GH¢947 million accepted.

Interest rates also saw a decline. The 91-day bill rate dropped from 20.79% last week to 17.71%, the 182-day bill fell to 18.96%, and the 364-day bill declined from 22.69% to 19.98%.

 

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