The government aimed to borrow GH¢7.4 billion in its latest auction, continuing its heavy borrowing trend since August. However, it fell short, securing only GH¢4.7 billion, a shortfall of 35.9%, despite increased interest rates across all three treasury bill instruments.
The 91-day treasury bill saw its interest rate go up to 25.64% from 25.01%, a notable increase of 63 basis points, marking one of the largest hikes in recent times. Similarly, the 182-day bill rose but slightly by 11 basis points, reaching 26.92%, and the one-year note climbed by 60 basis points to 28.67%, surpassing the monetary policy rate, which was recently reduced to 27%.
Interestingly, the sharp rise in the 91-day bill rate did not result in significant investor interest. However, the 60 basis point increase in the one-year note led to a marked increase in patronage, with subscriptions rising to 28% of the total borrowing, compared to the usual 5%. Nevertheless, this boost in one-year note demand was insufficient to meet the government’s borrowing target, leaving a shortfall of GH¢2.7 billion (35.9%).
Treasury bill undersubscription has become a recurring issue since the government ramped up its borrowing in August. Over the past three months, the government has met its borrowing target only once, highlighting investor resistance to the large-scale borrowing.
Ghana’s debt stock has surged, rising from GH¢633.3 billion in January to GH¢761.2 billion by the end of July. With continued borrowing through September, the debt figure is expected to increase further. The domestic debt component also rose significantly, from GH¢265.6 billion in June to GH¢290.9 billion by the end of July.
Experts attribute the government’s increased borrowing appetite to pre-election spending, which could widen the budget deficit and strain the economy next year. This rise in election-related borrowing contrasts with the government’s earlier pledge to maintain fiscal discipline.
The increase in the 91-day treasury bill rate will likely hinder efforts to reduce lending rates. The Ghana Reference Rate (GRR), which serves as the base rate for setting lending rates, is influenced by both the policy rate and the 91-day treasury bill rate. While the policy rate dropped by 200 basis points, the 91-day bill’s 63-basis-point rise will dilute the impact of the policy rate cut. A new, reduced GRR is expected to be announced on October 1st.
