The cost of servicing domestic debt by government has gone done slightly but temporarily.
This is because of reduction in Treasury bills rates, according to latest auctioning results by the Bank of Ghana.
Government is expected to spend almost half of its GH¢72.4 billion revenue for this year to settle interest payment. The domestic component of the interest cost is however estimated at GH¢28.3.
However, the fall in interest cost on Treasury bills which constitute huge component of the domestic borrowings is a sign of good signal for the fiscal management of the economy.
The latest T-Bills auctioning shows that the yield on the 91-day instrument has fallen by more than 1.5 percentage points since the beginning of the year to 12.89%, whilst that of the 182-day bill has gone down by 1.0% to 13.65%.
However, what is worrying is the government appetite for borrowing on the domestic market which if not checked will crowd out the private sector from getting access to loans, going forward.
Meanwhile, government exceeded its Treasury bills target by 25.7% in the latest auctioning.
It however accepted all the bids which was a little above GH¢1.11 billion.
It is coming on the back of the 3-year bond auctioned last Thursday in which government fell short of its target by about 5%.
Government 3-year bond fell short of target by 5.3%; ¢1.61bn mobilized
Last week, government 3-year bond issuance fell short of its target by 5.3%, auctioning results from the Bank of Ghana revealed.
It however raised GH¢1.61 billion at a favorable interest cost of 17.70%.
The cost of the debt was however in line with prevailing market conditions.
Prior to the issuance of this bond, all government bonds sold this year have been oversubscribed.