Ghana's T-bill costs plunge 19% as debt restructuring gains traction, but Middle East tensions loom

Ghana has achieved a significant breakthrough in reducing the cost of rolling over its domestic debt, with treasury bill yields falling dramatically over the past eight months. The one-year bill yield has plummeted from nearly 30% at the end of 2024 to just 10.1% by late August 2026, whilst six-month bills have dropped to around 6.5%, according to ratings agency S&P Global. This substantial reduction signals improved confidence in Ghana's fiscal position and offers much-needed breathing room for government finances.

The sharp decline reflects the stabilising effects of Ghana's domestic debt restructuring programme, which was implemented in December 2022. Following that restructuring, the Ministry of Finance imposed a three-year moratorium on issuing new medium- or long-term domestic bonds to allow the debt market to stabilise. As that ban period winds down, the government has begun issuing longer-tenor bonds in 2026, a strategic move designed to extend the maturity profile of local currency debt and reduce refinancing pressure in the short term.

Government ramps up T-bill issuance to meet financing needs

Despite the welcome decline in yields, the government has significantly increased its treasury bill issuance in recent weeks, signalling persistent financing pressures. Last week, the government raised GH¢1.53 billion above its target as acceptances fell short in previous auctions. This week's issuance target has been set at GH¢5.02 billion, the highest in recent times, to cover maturing bills worth GH¢3.91 billion and meet broader funding requirements.

The elevated issuance levels suggest that whilst the cost of borrowing has fallen, the demand for funds remains acute. However, analysts expect yields to stabilise rather than decline further, as the government's substantial financing needs will likely prevent dramatic reductions from this point onward.

Why it matters for Ghana

The fall in treasury bill yields is critically important for Ghana's economic recovery and medium-term fiscal sustainability. High interest rates on domestic borrowing have historically crowded out private sector investment and strained government budgets, forcing policymakers to reduce spending on essential services. Lower T-bill yields mean the government can refinance maturing debt at more reasonable rates, freeing up resources for healthcare, education, and infrastructure.

However, S&P Global has cautioned that geopolitical headwinds, particularly the conflict in the Middle East, pose a significant downside risk. Regional tensions could drive up global oil prices and inflation, increase financing costs globally, and weaken the Ghanaian cedi—potentially reversing some of these gains. A weaker currency would make Ghana's foreign debt more expensive to service and could reignite inflation pressures that have only recently begun to stabilise.

For ordinary Ghanaians, lower government borrowing costs eventually translate to better-funded public services and reduced pressure on the central bank to keep interest rates punishingly high. However, the ongoing need for substantial T-bill issuance underscores that whilst fiscal conditions are improving, Ghana's budget remains under strain and remains dependent on domestic investor confidence.