Over-Dependence on T-Bills for Government Financing Unsustainable
Jibran Qureishi, the Head of Africa Research at Standard Bank Group, the parent company of Stanbic Bank, has explained the reasoning behind Ghana’s cautious return to the bond market.
According to him, it is unsustainable for the government to rely solely on Treasury bills (T-bills) to finance its operations. The Finance Minister, Dr. Cassiel Ato Forson while presenting the 2025 Budget hinted at the government’s plan to reopen the domestic bond market. He explained that the reopening will be executed cautiously to establish large-sized benchmark bonds that will enhance market liquidity.
Even though the International Monetary Fund (IMF) had reservations due to the risk of the DSA being negatively impacted, Mr. Qureishi while speaking at the Stanbic Economic Series Webinar under the theme “The Economy Under a New Era,” described it as a positive development.
Highlighting the critical role of a functional bond market, he noted that bonds support Ghana’s economic recovery and long-term fiscal stability. “Financing government operations solely through T-bills is not sustainable. Since the domestic debt exchange program in 2022, Ghana’s bond market has remained dormant, with no new issuances or re-tapping of existing bonds. This has significantly reduced net portfolio investment, as reflected in the country’s balance of payments. Reviving the bond market is essential to attract investment and ensure liquidity in the financial system,” he explained.
Mr. Qureishi further indicated that the government’s reliance on T-bills has created a liquidity crunch in the secondary bond market. “Post the domestic debt exchange program, existing bonds were shifted from trading books to hold-to-maturity books, making the secondary bond market highly illiquid. Even if investors wanted to buy Ghanaian bonds, there simply wasn’t enough supply or scale to meet demand,” he stated.
However, he expressed optimism about the government’s recent steps to reopen the bond market. “We are likely to see a cautious reopening of Ghana’s bond market in the coming months. This is a positive development, as it will provide much-needed liquidity and attract portfolio investors who are eager to re-enter the market,” he said.
He also highlighted the importance of balancing fiscal sustainability with investor confidence. “While the IMF has expressed concerns that reopening the bond market could complicate debt sustainability analysis by categorizing offshore investments as external debt, it is crucial to strike a balance. A functional bond market is vital for long-term economic stability and growth,” he added.
Picture: Jibran Qureishi, Head, Africa Research - Standard Bank Group