Heavy T-bill buying limits business loans — Analyst
By Samuella Antwi
Economic Analyst Emmanuel Boateng has cautioned that the government’s heavy reliance on treasury bills (T-bills) continues to crowd out private sector borrowing, although recent trends in declining yields and monetary policy easing may gradually shift the balance in favour of businesses.
Speaking on the Business Breakfast Show on Zed Wednesday, 24 September, Mr Boateng explained that banks often allocate the bulk of their liquidity to government securities because of their safety, at the expense of extending credit to the private sector.
“Once banks are investing heavily in the T-bill market, they are forgoing giving money to businesses that need loans. Government paper is safer, so banks naturally prioritise it over riskier private sector lending,” he said.
However, Mr Boateng pointed out that the Bank of Ghana’s recent cap on risk exposure, coupled with falling yields on long-dated bills, could nudge banks to seek higher returns through private sector lending, particularly to firms with strong creditworthiness.
The economic analyst stressed that the sustainability of this trend will depend on how far yields continue to decline. If they remain elevated, he warned, crowding-out pressures will persist. But if yields fall meaningfully, credit could flow more freely to stable businesses.
He underscored the importance of transparency in government auctions, saying oversubscription of treasury bills should be seen as evidence of resilience, but sustained investor confidence requires consistent macro-level discipline.
Mr Boateng recommended that government and the Bank of Ghana improve credibility by clearly communicating fiscal consolidation plans, commitments to the IMF programme and debt management strategies.
“Publishing detailed results and providing a predictable issuance calendar will reduce uncertainty and build trust among investors. Government actually does this well, but it can be deepened,” he emphasised.
Mr Boateng further argued that auction oversubscriptions should be linked to broader indicators of economic stability, including declining inflation, exchange rate stability and fiscal reforms, to encourage investors to extend maturities and reduce risk premiums.
Citing recent market data, the economic analyst noted that the 91-day bill has consistently offered the lowest interest rates, with yields falling from 10.53 per cent last week to 10.46 per cent this week. He attributed this decline to improving macroeconomic conditions.
“Inflation, which was as high as 54 per cent in 2022, is now down to 11.5 per cent, with a medium-term target of 6 to 10 per cent. The monetary policy rate has also dropped from 30 per cent to 21.5 percent within six months. What we are seeing in the T-bill market is simply a reflection of this improving environment,” he explained.
Mr Boateng also stressed that while Ghanaian investors remain largely risk-averse, preferring low-risk financial assets, continued macroeconomic stability could gradually reshape the credit market to support private sector growth.
