Interest rates on all three of Ghana’s government short-term instruments declined during the latest treasury bill auction, despite the government narrowly missing its borrowing target for the seventh consecutive week. The government aimed to raise GH¢5.32 billion but secured GH¢5.23 billion, falling short by less than 2%. This slight shortfall is in line with recent trends, as the government has consistently struggled to borrow more than GH¢5 billion from the treasury market.
The auction last Friday followed a pattern of high government borrowing, raising concerns that the private sector may be denied essential funds for business operations. Government managed to stay within its expenditure limits during the first half of the year, a factor that many believe contributed to the relative stability of the cedi since the beginning of August. However, there are concerns that this stability could be threatened if the high levels of borrowing seen in August continue into September.
Interest rates saw a slight decline, with the 91-day bill now yielding 24.78%, down from 24.83%, the 182-day bill dropping from 26.74% to 26.68%, and the one-year note decreasing slightly to 27.81% from 27.85%. Market analysts suggest that the reduction in interest rates may be influenced by the recent drop in the July inflation rate to 20.9%, down from 22.8% in June. This decrease in rates could also signal a potential drop in the policy rate when the Bank of Ghana’s Monetary Policy Committee meets next month.
Investors remain cautious about longer-term government instruments, with the 91-day bill accounting for 71% of the total amount raised, while the one-year note accounted for only 4.8%. This preference for shorter-term investments reflects ongoing uncertainty in the market.
