Following the frontloading of its financing needs in the first half of the year – that is, a structuring to borrow more for the first six months of the year, the government has slowed down its participation in the domestic debt market, according to the reports. data from the Ministry of Finance.
The new issuance schedule announced by the Treasury Department of the Ministry of Finance on Monday October 11 indicates that the government intends to issue GH 21.17 billion in the last quarter, of which GH20.13 billion to extend the maturities and the remainder approximately – GH 1 billion yen – or 4.9% of the total target – is intended for new issues to meet its financing needs during the period.
In the previous schedule – the third quarter, the government indicated a new issuance target of GH ¢ 611.94 million, which was about 2.6% of the total target for this period.
But compared to the first and second quarters, the government requested GH ¢ 2.61 billion and GH ¢ 4.13 billion of new issues in the domestic debt market, indicating that new issues in the first half of the year have were higher than in the second half of the year.
This move is welcome news, given the rise in debt levels, particularly in the first half of the year. The stock of public debt at end-June 2021, as a percentage of GDP, rose to 77.1% of GDP from 76.1% at end-December 2020, including bailouts of the financial and energy sector.
Commenting on this in a previous interview with the B&FT, Databank Research senior analyst Courage Kingsley Martey said the decline in demand for new issues is a reassuring signal amid market concerns about the pace of the increase in the outstanding Ghanaian debt.
“The low need for new issues reflects strong investor demand and excessive absorption of issues in the first half of 2021. It is therefore encouraging to see the Treasury reduce its new issues as domestic financing needs are met.” , he explained.
After falling to very low levels, domestic yields have recovered since the third quarter, mainly due to selling pressure from non-resident investors; which created an oversupply of bonds in the secondary market without a corresponding supply, leading to a fall in the price of bonds (higher yields).
Thus, the government’s new decision to limit new issuance could help limit further upward pressure on yields in this final quarter, subject to other key factors such as inflation and currency risks.
But the fact that a majority of the planned issuance renews existing debt means that investors will still need to deploy liquidity on their balance sheets.
In accordance with the medium-term debt management strategy, the government indicates that it may announce further drawdowns / reopening of existing instruments depending on market conditions.