Interest rates continue to surge

Interest rates in the domestic market continue to rise as the fiscal economy faces new challenges.

According to the Bank of Ghana‘s weekly Treasury bill auction results, interest rates on short-term financial instruments increased marginally by 0.03 percent on the 91-day and 182-day T-Bills.

The 91-day Treasury bill was priced at 12.91 percent, while the 6-month bill was priced at 13.29 percent.

Rising interest rates have become necessary because they are the only way for the government to secure sufficient funds to finance its short-term projects.

Though the government has stated its intention to keep yields low, the country’s struggling fiscal economy has forced it to raise interest rates in order to attract domestic investors.

This, however, will result in an increase in borrowing costs because banks will be unable to raise their lending rates.

The troubling situation, however, is the ‘crowding out effect,’ which is worsening.

According to the auction results, the government achieved a 24 percent oversubscription of the weekly sale of short-term instruments, but at a lower target.

The government had set a target of 664 million, but received slightly more than 827 million. It did, however, accept all 827 million bids.

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SOURCE: myjoyonline