The government’s weekly borrowing target from the short-term market (T-Bills) continues to face challenges as investors continue to stay away from the instruments, leading to undersubscriptions.
This is the sixth consecutive week the government’s target has suffered a shortfall, raising critical questions about investors’ confidence in the short-term bills.
The latest auction report released by the Bank of Ghana reveals that despite a relatively low target, the bids submitted by investors fell short by GH₵ 388 million, putting the government’s financing of its recurrent expenditure in jeopardy.
From a relatively high target of GH₵ 3.9 million two weeks ago, the government planned to borrow a total of GH₵ 3.4 billion last week. At the end of the auction last Friday, total bids submitted by investors totalled GH₵ 3.0 billion, leading to the shortfall of about GH₵ 388 million.
This shortfall represents an undersubscription of 11.56%. For the first time in many weeks, all the bids submitted by investors were accepted by the government, signalling the need for funds to finance expenditure.
A significant portion of bids came from the 91-Day bill, with bids amounting to GH₵ 2.03 billion. The 182-Day bill also contributed GH₵ 622.79 million, while the 364-Day bill also amounted to just GH₵ 316.27 million.
The trend of the falling interest rate continued unabated despite the failure to meet the target. This is in accordance with the government’s agenda to bring down the interest rate.
From the auction report, the yield on the 91-day bill marginally declined from 14.6938% to 14.5669%. The 182-day bill also declined from 15.2506% to 15.0192%, while the rate on the 364-day also fell to 15.1679% from 15.6564%.
The persistent shortfall in the government’s target in recent weeks, amid falling interest rates, are deepening concerns for the government to raise the rate to attract investors. It is believed that investors are shying away from the bills due to the low returns it now offer.
The consistent drop also has implications for the government’s budget funding since alternative funding sources are limited. Despite the consistent undersubscription, it is the agenda of the government to bring down the interest rate even further. It is, however, unclear how the government will navigate this maze of consistent shortfall amid the dropping rates.
In the meantime, the government plans to raise a lesser amount of GH¢ 7.5 billion in its upcoming auction this week. Market watchers are closely monitoring the market to see if there will be a turnaround or if the undersubscription streak will persist.
