Accra: The government's falling domestic borrowing costs are opening a more favorable financing window to build a GHS33 billion buffer ahead of a sharp increase in debt repayments in 2027, when domestic DDEP debt service is projected to rise by about 164 percent. Treasury bill rates have continued their downward trend, with the latest auction pushing the 91-day interest rate below 5 percent to 4.9460 percent, while the 182-day rate declined to 6.8587 percent and the 364-day rate fell to 10.7778 percent.
According to Ghana Web, the decline strengthens the government's domestic financing position as it prepares for one of the heaviest repayment periods under the Domestic Debt Exchange Programme (DDEP). The government's debt repayment schedule puts domestic DDEP debt service at about GHS21.78 billion in 2026, rising to approximately GHS57.56 billion in 2027 before remaining elevated at GHS52.52 billion in 2028. The 2027 requirement is therefore about GHS35.8 billion higher than this year's, representing an increase of roughly 164 percent.
A substantial part of next year's requirement relates to principal repayments. Government's debt management projections put 2027 domestic DDEP principal maturities at about GHS39.6 billion, with another GHS18 billion expected in interest payments. Treasury is seeking to build funding ahead of those maturities rather than face the full financing requirement when the securities fall due.
The 2026 Annual Borrowing Plan provides for GHS16 billion, equivalent to seven percent of projected non-oil tax revenue, to be transferred into the Sinking Fund, alongside another GHS17 billion to be mobilized through domestic bond issuances. Together, the two measures are expected to provide GHS33 billion towards the 2027 DDEP principal repayments. The interest component is expected to be provided separately through the 2027 budget.
The GHS16 billion Sinking Fund allocation will come from fiscal resources, while the GHS17 billion financing component is expected to be raised through domestic bonds. Falling T-bill rates therefore do not directly finance the entire GHS33 billion buffer, but they point to the sharp improvement in domestic financing conditions as government returns to longer-term borrowing.
In December 2024, the 91-day Treasury bill yielded 28.04 percent, while the 182-day and 364-day instruments stood at 28.68 percent and 30.07 percent respectively. By October 2025, the rates had declined to 10.67 percent, 12.47 percent, and 12.88 percent before falling further this year. The latest 91-day rate of 4.95 percent is now about 23 percentage points below its December 2024 level. The one-year rate has fallen by more than 19 percentage points over the same period, from 30.07 percent to 10.78 percent.
Investor demand has remained strong even as the rates paid by the government have declined. At the latest auction, bids reached GHS12.35 billion against the government's GHS5.15 billion target, providing Treasury with enough demand to reject higher-rate offers while still raising more than initially planned. The improvement in domestic financing conditions is particularly important as Treasury moves beyond short-term borrowing and rebuilds the longer end of the government securities market.
Restrictions on new medium- and long-term domestic bond issuance imposed after the DDEP expired earlier this year, clearing the way for the government to return to longer-dated securities. The return to the bond market gives Treasury an opportunity to raise part of the GHS17 billion required for the 2027 buffer without concentrating additional borrowing in Treasury bills that mature every three, six, or 12 months. Longer maturities would also spread future repayment obligations and reduce the amount of debt the government has to refinance frequently.
The need to lengthen maturities has become more important because the DDEP created large concentrations of repayments in 2027 and 2028. Government must therefore manage two financing requirements simultaneously: meeting current budget and refinancing needs while accumulating enough resources to prevent the 2027 maturities from creating another large funding requirement within a relatively short period.
The Sinking Fund is intended to address part of that pressure by setting aside resources before the debt falls due. The planned GHS16 billion transfer would cover about 40 percent of the approximately GHS39.6 billion DDEP principal scheduled for 2027. Adding the GHS17 billion expected from domestic bond issuance would raise the planned buffer to about 83 percent of the principal requirement. The remaining principal requirement would be substantially smaller if the full GHS33 billion is assembled as planned.
Government has already paid GHS41.36 billion to DDEP bondholders since 2025, including the latest GHS10.82 billion coupon payment made in August. The repayment burden will become heavier next year as more principal begins to mature alongside interest payments. External debt service will add to the financing requirement. Ghana is expected to face approximately US$2.5 billion in external debt service in 2027, followed by another US$2.4 billion in 2028, putting additional pressure on government cash flows during the same period that domestic DDEP repayments remain elevated.
Building the domestic buffer during 2026 would therefore reduce the amount Treasury has to mobilize when both domestic and external repayment obligations increase next year. The fall in domestic rates provides a better environment for the borrowing side of that strategy. Government can raise longer-term funds at a point when short-term rates have dropped sharply, investor demand for government securities remains strong, and access to the domestic bond market has been restored. The latest auction reinforces that improvement rather than forming the center of the story. The 91-day rate has now broken below 5 percent, and the one-year rate has fallen to 10.78 percent, extending the reduction in government's cost of domestic funding. Government's ability to take advantage of those conditions over the remaining months of 2026 will determine how much of the GHS33 billion buffer is in place before DDEP debt service rises from about GHS21.78 billion this year to nearly GHS58 billion in 2027.