For the past nine weeks, the government has consistently failed to meet its treasury bill targets, despite marginal increases in interest rates for two of the three instruments. In its most recent auction, the government aimed to raise over GH¢ 5.6 billion but secured just GH¢ 4.84 billion, representing a 13.5% shortfall. This comes as the interest rate on the 91-day bill rose slightly from 24.89% to 24.90%, and the one-year note saw an increase from 27.91% to 27.92%. However, the 182-day bill maintained its rate at 26.78%.
The 91-day bill saw the highest patronage, accounting for 80.5% of the total amount raised, while the 182-day bill contributed just 15.4%, and the one-year note made up 4.1% of the total.
Government borrowing, which has surged since August, suggests potential excessive spending in the latter half of the year. This could lead to the crowding out of the private sector, as banks may prefer investing in treasury bills over lending to private enterprises. In August alone, the government borrowed over GH¢ 23 billion, marking an increase of GH¢ 7.3 billion compared to July, with similar margins seen in June and May. Plans to borrow GH¢ 5.4 billion at the next auction on September 13 indicate that the heavy borrowing trend may continue in September.
The consecutive increases in treasury bill interest rates over the past two weeks offer little indication of a potential drop in the policy rate when the Bank of Ghana’s Monetary Policy Committee meets later this month. The outcome of August’s inflation data, expected to be released this week, will provide clearer insight into whether the policy rate, currently at 29%, will remain unchanged or decrease.
