The Government of Ghana, for the third consecutive week, has missed its treasury bills borrowing target despite another consecutive increase in interest rates.
The government planned to borrow a total of GH₵ 6.1 billion from the short-term instruments market. However, after the auction by the Bank of Ghana, the government was able to accrue only GH₵ 3.8 billion. The target was missed by a whopping GH₵ 2.2 billion representing a shortfall of 37%.
The Auction results reveal that all bids tendered were accepted but could not meet the target.
About 76.9% of the total bids accepted came from the 91-Day Treasury Bill which accrued GH₵ 2.9 billion. The 182-Day Bill also accrued GH₵ 669.37 million representing 17.4% of the total bids. The 364-Day Bill also contributed GH₵ 216 million which represents a paltry 5.65% of the total funds accrued by the government.
The significant undersubscription of the government bills came amidst a rise in interest rates but unfortunately, the hikes could not lure many investors.
The BoG auction results reveal that the yield on the 91-Day was increased from 27.193% to 27.362% while the 182-Day Bill saw an increase from 27.988% to 28.098%. The 364-Day bill also saw a rise to 29.879 from 29.825.
Analyst explains that this GH₵ 2.2 billion shortfall which represents a 37.09% drop in the target could potentially be attributed to a drop in investor confidence ahead of the 2024 crucial elections. The political uncertainties ahead of the elections have possibly heightened investor caution as there is a risk of fiscal indiscipline, potential policy shift, and a change in government.
As a result, many investors prefer to adopt a “wait-and-see approach” or demand more higher yields for their participation, which the government may not be willing to meet.
This undersubscription could have critical implications for Ghana’s economy. A reduced inflow of funds from treasury bills may hinder the government’s ability to meet its short-term financing needs, potentially leading to delays in paying contractors, financing essential projects, or managing its operational budget. Furthermore, the government may be forced to turn to more expensive borrowing options, which could worsen Ghana’s already strained public debt situation.
Meanwhile, the government has targeted to borrow GH₵ 6.5 billion this week on the treasury bill market. This is a significant increase over the amount that was targeted last week but was heavily undersubscribed.
