It can be concluded that the government is hell bent on driving down interest rates in the economy through T-bills, irrespective of the price it pays. For the fourth week running, the Government has failed to meet its T-bill auction target, raising concerns about investor confidence in the short-term bill.
But behind the missed target is a more telling story, which shows the commitment of the government to push down the interest rate.
Analysis by The High Street Journal reveals that the quest to reduce interest rates by the government is being pursued at the expense of the target. There is a deliberate strategy that ensures this agenda of the government, even if it means rejecting badly needed funds.
The auction reports confirm that investor appetite for government securities is softening, with total bids consistently falling below weekly targets.
Yet, in a surprising twist, the government is turning away some of these limited bids, not because the money isn’t needed, but because the interest rates demanded are too high.
What the Numbers Say
Checks by The High Street Journal from the BoG’s auction report, published weekly, confirm this trend. Let’s cite a few of them;
The BoG’s auction report for May 16, 2025, reveals that despite a target to borrow GH¢6.7 billion, total bids submitted by investors amounted to GH¢5.4 billion. However, GH¢ 2.6 billion was rejected as the government walked away with just GH¢ 2.8 billion.
The June 6, 2025, auction report also revealed that the government targeted to borrow GH¢ 6.7 billion. However, total bids amounted to GH¢5.5 billion. The government rejected a total of GH¢1.1 billion.
Even the latest auction report last week conforms to this trend. Although the target for the week was GH₵ 4.6 billion, bids submitted totalled GH₵ 3.4 billion. The government only accepted GH₵ 2.9 billion, rejecting a total of GH₵ 417.7 million.
Given this agenda, it is becoming very rare for the government, in the last few months, to fully accept bids from investors irrespective of whether the bids meet the target or not.
By rejecting bids with “high interest”, the Government is sending a strong message to the market that it is willing to forgo funds in the short term to force interest rates down.
Is the Approach Yielding the Expected Results
Judging from the trend of interest rates on the bills, it is safe to say that the approach has been very effective.
At the time this government was sworn in January 2025, the rate on the 91-day bill was 28.337%. The 182-day bill was 28.964% and the 364-day also hovered around 30.176%.
Within barely 6 months, the government has been able to cut the interest on these by about 50%. The yield on the 91-day bill is 14.6976%. The 182-day bill has also significantly dropped to 15.2540%. while the rate on the 364-day has also fallen to 15.6936%.
It is also worth mentioning that apart from the government’s target for interest rates, the Bank of Ghana Governor has also indicated that its target is to drive interest rates to below 10% confirming the confluence of policies between the two independent economic managers.
The Trade-Off
By rejecting high-yielding bids, the government is prioritizing long-term fiscal sustainability over short-term liquidity. The policy is aligned with the broader economic management objective of reducing Ghana’s domestic debt servicing burden and bringing macroeconomic stability to interest and inflation rates.
There are numerous positive implications for the government. The approach means a reduced cost of borrowing: The strategy is likely to help lower the average cost of debt in the medium term, easing pressure on public finances.
For businesses, the move, if sustained, will quicken the pace of the reduction in the lending rates since the interest on t-bills is a significant determinant of lending rates through the Ghana Reference Rate.
It demonstrates to international partners and credit rating agencies that Ghana is serious about fiscal prudence.
But the downside is evident.
There is the risk of short-Term Liquidity Stress. Rejecting investor bids means the government may struggle to meet short-term cash obligations such as salaries, interest payments, or contractor arrears.
There is also the risk to credibility. This is because investors perceive this as government desperation or market interference, which may reduce confidence and future participation in auctions.
Implications for Investors
This move pushes for Competitive Bidding. Investors are now forced to moderate their interest expectations, which could help normalize market behavior.
The move also helps the market become more predictable and less speculative, potentially reducing volatility.
The downside of this move is lower returns on investments. For investors relying on high yields in T-bills as a hedge against inflation, the new strategy may limit returns as the low rate offers to real return when compared to inflation.
In addition, repeated bid rejections could discourage participation in future auctions, especially among institutional investors.
The Bottomline
The current developments in the T-bill market reveal a government caught between two imperatives: funding its operations and resetting the price of money. The development shows that the government is committed to ensuring that the cost of borrowing for both the state and businesses comes down.
However, this comes with a short-term cost as far as meeting its short-term obligations is concerned.
