For the sixth consecutive time, the government has faced a significant shortfall in its treasury bills auction, with a notable undersubscription of approximately 6.91% in the latest round. This shortfall is a serious concern for the government’s ability to finance its operations and could potentially lead to a substantial increase in borrowing costs and a higher debt burden.
This shortfall has implications for the government’s ability to finance its operations and could potentially lead to increased borrowing costs and a higher debt burden.
According to the Bank of Ghana, investor interest in treasury bills has remained relatively low. The recent auction drew bids totalling GH¢4.6 billion, short of the GH¢4.9 billion target.
Breaking down the bids:
- 91-day Bill: GH¢3.6 billion, which constitutes 78.26% of total bids, was entirely accepted by the government.
- 182-day Bill: Bids worth GH¢733.59 million were accepted in full.
- 364-day Bill: Bids totalling GH¢284.92 million were also accepted in full.
Interest rates on the money market range between 24% and 27%.
Analysts attribute the shortfall to the government’s ambitious auction targets and tight liquidity conditions.
These conditions have been exacerbated by recent changes in cash reserve ratio requirements, which have increased the amount of funds that banks must hold in reserve, thereby reducing the funds available for investment in treasury bills.
In response to the continued undersubscription, the government has communicated to the International Monetary Fund (IMF) its unwavering commitment to issuing sufficient treasury bills to address the budget deficit.
The government’s debt management strategy will prioritize ensuring adequate domestic financing in the short term, with a clear focus on structural market improvements to be considered in the medium term.
