Interest rates continue to rise

Interest rates continue to soar domestically as challenges within the fiscal economy persist.

According to the results of the Bank of Ghana’s weekly treasury bill auction, interest rates on short term financial instruments increased slightly by 0.03% on 91 and 182 day treasury bills.

While the 91-day Treasury note went to 12.91%, the 6-month note was priced at 13.29%.

Raising interest rates has become necessary because it is the only way for the government to obtain sufficient funds to finance its short-term projects.

Although the government has expressed a commitment to keeping yields low, the struggling fiscal economy has forced it to raise its rate to attract domestic investors.

However, this will lead to an increase in the cost of borrowing as banks will not have the ability to adjust their lending rates upwards.

But the troubling situation is the ever-worsening “crowding out effect”.

According to the auction results, the government achieved a 24% oversubscription of the weekly sale of short-term instruments, but with a reduced target.

The government had targeted ¢664 million, but got just over ¢827 million. He, however, accepted all offers of ¢827 million.

Securities Tenders submitted (GH¢) Bids Accepted (GH¢) Interest rate
91 day invoice 714.95 million 714.95 million 12.91%
182 day invoice 112.19 million 112.19 million 13.29%
Total 827.14 million 827.14 million
Target 664 million

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