In a shift from its recent pattern of heavy borrowing, the government set a smaller target of GH¢4.565 billion in its latest treasury bill auction, slightly exceeding it by 1.07% and securing GH¢4.6 billion. This achievement, after a long stretch of undersubscription, was made possible by increasing interest rates for two key instruments.
From August through October, the government had consistently set borrowing targets around GH¢6 billion or more. However, in last Friday’s auction, it lowered the target to under GH¢5 billion, marking a significant departure from previous months. The decision to reduce the borrowing target may have been influenced by the 38.5% undersubscription recorded in a prior auction or consultations with the International Monetary Fund (IMF), which recently reviewed the economy.
The auction results, published by the Bank of Ghana, indicate that the government intends to maintain lower borrowing levels, aiming for approximately GH¢4 billion in the next auction scheduled for Friday, October 18.
In terms of interest rates, after reducing them in the previous auction, the government increased the rates for the 91-day bill and the one-year note while reducing the 182-day bill rate. The 91-day bill now offers 25.61%, up from 25.45%, and the one-year note rose slightly to 28.58% from 28.51%, while the 182-day bill dropped marginally to 26.90% from 26.92%.
The rise in interest rates is likely tied to the recent inflation increase from 20.4% to 21.5%. Keeping rates low would result in lower real returns for investors, potentially discouraging participation in future treasury bill offerings.
