Paragraph 1: Ghana’s Overreliance on Treasury Bills and the Need for Change
Ghana’s financial landscape is currently characterized by an overdependence on the treasury bill (T-bill) market. This reliance has emerged as a significant concern, prompting Finance Minister Dr. Cassiel Ato Forson to unveil a series of strategic measures aimed at diversifying funding sources and reducing the country’s vulnerability to the fluctuations of the short-term debt market. The Minister’s announcement, made during a high-level meeting with bank executives and the Governor of the Bank of Ghana, underscores the government’s commitment to restoring macroeconomic stability and bolstering investor confidence. This overreliance stems from Ghana’s current exclusion from the international capital market, preventing the issuance of new Eurobonds, and the suspension of domestic bond issuance under the Domestic Debt Exchange Programme (DDEP).
Paragraph 2: The Current State of T-Bill Borrowing and Its Implications
As of March 14, 2025, the government’s borrowing from the T-bill market had already reached a staggering GHC 82 billion, with expectations of further increases before the end of the first quarter. This dependence, while offering a temporary solution, carries significant risks. Although the interest rates on T-bills have fallen considerably from an average of 29.16% to 17.25%, reducing the immediate cost of borrowing, the overall reliance on this short-term instrument poses a threat to the stability of the Ghanaian Cedi. The continuous borrowing from the T-bill market creates a cycle of debt accumulation and potentially exposes the government to refinancing risks should interest rates rise sharply in the future.
Paragraph 3: The Government’s Commitment to Diversification and Stability
Recognizing the inherent dangers of excessive T-bill dependence, the government is actively pursuing alternative funding sources. Dr. Forson emphasized the government’s commitment to reducing this reliance and strengthening policy coordination between fiscal and monetary authorities. The focus is on achieving macroeconomic stability and avoiding a repeat of the economic turbulence experienced in 2022. This proactive stance signals a shift towards a more sustainable fiscal approach, prioritizing long-term stability over short-term expediency.
Paragraph 4: Exploring Alternative Funding Avenues: Domestic Revenue Mobilization
Experts recommend a multi-pronged approach to diversify Ghana’s funding sources. A key element of this strategy involves bolstering domestic revenue mobilization. This can be achieved through a combination of measures aimed at enhancing tax collection efficiency, clamping down on tax evasion, and broadening the tax base through the formalization of informal economic sectors. Implementing a modern digital tax administration system, strengthening property tax collection, and improving overall tax compliance could generate substantial revenue streams for the government, reducing the need for excessive borrowing.
Paragraph 5: Exploring Alternative Funding Avenues: Public-Private Partnerships and Multilateral Engagement
Beyond domestic revenue mobilization, the government should actively explore Public-Private Partnerships (PPPs) as a means of financing crucial infrastructure projects. PPPs can alleviate the burden on public finances while attracting private sector investment and expertise. Furthermore, deepening engagement with multilateral institutions like the International Monetary Fund (IMF), World Bank, and African Development Bank (AfDB) can unlock access to concessional loans with favorable terms, including longer repayment periods and lower interest rates compared to commercial borrowing.
Paragraph 6: Synergy between Fiscal and Monetary Policy: A Path to Stability
Dr. Forson underscored the importance of collaboration between the Ministry of Finance and the Bank of Ghana in ensuring macroeconomic stability. Aligning fiscal and monetary policies is crucial for creating a stable economic environment conducive to growth and investment. This coordinated approach will be instrumental in navigating the current challenges and building a more resilient and diversified financial framework for Ghana. The commitment to reducing T-bill reliance, coupled with the exploration of alternative funding mechanisms, signals a positive step towards achieving long-term fiscal sustainability.
