The second week of President Mahama’s administration has recorded another impressive performance of the government’s short-term instruments.
The government exceeded its treasury bill borrowing target by close to 40%. This follows a 55% oversubscription in the first week of the NDC government.
This marks a fourth consecutive oversubscription after 9%, 24%, 55%, and 39% respectively recorded two weeks before and two weeks after the swearing-in.
The Bank of Ghana’s (BoG) latest auction results reveal the new government planned to borrow GH¢ 6.35 billion last week. After the auction, GH¢ 8.84 billion exceeded the target by about GH¢ 2.48 billion. This marks an oversubscription of 39% of the planned target.
The consecutive oversubscriptions, analysts say mark consistent improvement in investor confidence.
The normal trend continued as the majority of the bills came from the 91-day bill accruing a total of GH¢ 5.64 billion. This represents 63.90% of the total mobilization. 14.79% of the total bids also came from the 182-day instrument accruing a total of GH¢ 1.31 billion.
The 364-day instrument also accumulated a total of GH¢ 1.89 billion representing 21.311%.
It is worthy of note that this oversubscription also came at the expense of an increase in interest rate. The yield on the 91-day bill saw an increase from 28.337% to 28.417%.
The rate on the 182-day also increased from 28.964% to 28.971%. The 364-day bill also saw a hike from 30.176% to 30.287%.
The new 39% oversubscription marks sustained investor confidence over a fourth-week period. However, the consistent rise in the interest rates raises concerns about the debt burden of the country.
Analysts bemoan that the continuous rise in interest rates aside from worsening the country’s debt overhang, is a threat to the private sector development.
This, economists explain as “crowding-out effect” where the private sector does not have access to affordable funding since creditors choose to lend to the government instead of businesses.
Meanwhile, the government plans to raise another GH₵ 6 billion this week through the auction of additional treasury bills in Ghana.
