Mr. Seth Terkper, a former Finance Minister, has cautioned the government against relying on Treasury Bills (T-bills) to finance the country’s long-term development.
He explained that T-bills, which are short-term debt instruments with maturities ranging from 91 days to one year, are not sustainable options for financing Ghana’s economic and development needs, which are long-term in nature.
“Domestic borrowing through T-bills is too narrow, and it will raise domestic costs. Ghana, an economy that is by developing or lower-middle-country standards, should not be depending on such a narrow base. It is not sustainable,” he said.
Mr. Terkper, who is also an accountant, said this during a media engagement ahead of the 2023 Mid-year budget review in Accra.
He said relying on T-bills could expose the economy to risks, lead to higher demand for yields, and dampen investor confidence, should the government be unable to honor the bills.
The former Finance Minister also said such a situation could result in a rise in interest rates and inflation, and increase the country’s debt levels.
He called for an urgency in increasing revenue and reducing expenditure to ensure that the country has a successful debt restructuring and implementation of the IMF program for economic recovery and resilience.
The former minister, who led Ghana to its 16th bailout program with the International Monetary Fund (IMF), said confidence in the bond market had waned due to the Domestic Debt Exchange Programme (DDEP).
“The DDEP has really shaken investor confidence in the bond markets, and that’s why the government now relies heavily on treasury bills for funds, which by the way is unsustainable for both developing and middle-income countries like Ghana,” he said.
Professor Anthony Mawuli Sallar, the Executive Director of Think Progress Ghana, a public policy think tank, urged the government to implement a strict fiscal regime, ensure expenditure efficiency, and adhere to procurement laws.
“We want to hear a clear commitment to long-term investments that have the potential of generating revenue to service our domestic and foreign debts in the mid-year budget review,” Prof. Sallar said.
The former Dean of Students at the Ghana Institute of Management and Public Administration (GIMPA) said there was a need for improvements in budget transparency and efficiency.