Treasury Bill Rates Falling Behind Inflation: What Does It Mean for Ghanaian Investors?

In recent months, Ghana has witnessed a critical development in its financial landscape: a notable divergence between the rates on 91-day treasury bills and the prevailing inflation rate. As of March 2025, treasury bill rates sharply declined to 15.9%, while inflation held steady at 23.1%. This widening gap—depicted clearly in the recent Finex Insights visual—raises significant questions for investors and savers alike.

Inflation overtakes treasury yields in Ghana!

Understanding the Numbers

Treasury bills (T-bills) are short-term debt instruments issued by the government, generally considered safe and reliable investments due to their low-risk nature. Investors are attracted by predictable returns, making T-bills a popular choice, especially in uncertain economic environments.

Inflation, meanwhile, indicates the rate at which prices for goods and services are rising, directly affecting the purchasing power of money. When inflation outpaces the returns from fixed-income investments such as treasury bills, investors face negative real returns.

What Negative Real Returns Mean

The current gap of 7.2 percentage points between the inflation rate (23.1%) and the 91-day treasury bill yield (15.9%) means that investors are effectively losing money in real terms. Their investments, while still safe from nominal losses, are declining in actual purchasing power.

This situation can discourage savings, as individuals and institutions seek alternative investment avenues that promise better protection against inflation. This shift can have broader implications for economic stability and growth, affecting government borrowing strategies and financial market dynamics.

Implications for Ghana's Economy

A sustained scenario where treasury bill rates trail inflation could have several repercussions:

• Reduced Investor Confidence: Investors might become hesitant, shifting their capital away from treasury bills towards riskier but potentially more rewarding assets.

• Currency and Economic Pressure: Persistent negative real returns could drive investors to seek investment opportunities abroad or buy forex, putting additional pressure on the local currency and potentially leading to further economic instability.

• Government Financing: The government may face difficulties raising funds through treasury bills, potentially forcing higher borrowing costs in the future.

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Strategies for Investors

Investors in Ghana may consider several strategies in response to these conditions:

• Diversification: Spreading investments across multiple asset classes—stocks, real estate, commodities, and foreign-currency assets—to mitigate risks associated with inflation.

• Indexed Investments: Considering inflation-indexed bonds or other financial instruments explicitly linked to inflation, offering protection against real value erosion.

• Professional Advice: Consulting financial advisors to recalibrate investment portfolios in line with current market realities and forecasts.

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Final Thoughts

The significant gap between treasury bill rates and inflation is more than just a statistic—it’s an indicator of economic stress and a call to action for both policymakers and investors. Awareness and proactive strategies will be crucial for navigating this financial landscape, preserving wealth, and securing future economic stability in Ghana.