The first week of the new President John Mahama administration has recorded a massive over-subscription in the government’s treasury bill auction signaling a massive boost in investor confidence.
The government last week, a period that marked the swearing-in of President Mahama, exceeded its treasury bill borrowing target by a little over 55%. This marks a third consecutive oversubscription after 9% and 24% were respectively recorded in the previous weeks.
The latest 55% oversubscription could possibly mark a gradual rebound of investor confidence in the government’s short-term instrument amid a change in government.
Bank of Ghana’s latest auction results reveal the government targeted to borrow about GH¢ 5.2 billion last week. After the auction, the government managed to mobilize approximately GH¢ 8.1 billion exceeding the target by GH¢ 2.9 billion. This represents an oversubscription of 55.3% of the planned target.
However, it is worth noting that this highly significant oversubscription was recorded amid another streak of hikes in interest rates for the bills.
Unlike two weeks ago, all bids tendered last week were accepted. The usual trend continued as the majority of the bills came from the 91-day instrument accruing a total of GH¢5.5 billion. This represents 68% of the total bids accepted. The 182-day also contributed a total of GH¢1.4 billion representing 17.5% of the total bids while the 364-day bill also managed GH¢1.1 billion marking 14%.
This significant oversubscription which came at the expense of an increase in interest rate witnessed the 91-day instrument increasing from 28.190% to 28.337%. The yield on the 182-day also increased from 28.917% to 28.964% and the 364-day instrument also witnessed a hike from 30.151% to 30.176%.
Although this massive 55% oversubscription of the short-term government instrument marks a strong rebound in investor confidence, however, the consistent rise in the interest rates raises concerns about the debt burden of the country.
The continuous rise in yields, experts explain risk exacerbating the existing debt overhang, increasing the government’s debt service obligation when these short-term instruments mature.
This could mark a deterioration of the government’s fiscal space as ordinary Ghanaians may take a hit by leaving very little to no resources for development initiatives such as capital expenditure, social protection, and funding of key policy measures.
The government plans to raise another GH₵ 6.4 billion this week through the auction of additional treasury bills in Ghana.
Meanwhile, the government plans to borrow GH¢200 billion from the treasury bill market in 2025. This marks a GH¢20 billion reduction from the estimated GH¢220 billion borrowed in 2024. This adjustment translates to an average weekly borrowing of GH¢3.9 billion, down from GH¢4.2 billion in the previous year.
