The government borrowed GH¢4.488 billion through treasury bills at its latest auction on Friday, July 12, narrowly missing its target of GH¢ 4.721 billion by 4.9%. This outcome was anticipated, as the government has consistently struggled to meet its borrowing targets whenever it aims for amounts close to GH¢5 billion or more.
Despite a further decline in year-on-year inflation to 22.8% in June from 23.1% in May, interest rates on all three treasury bill instruments remained unchanged. The interest rate on the 91-day bill held steady at 24.78%, the 182-day bill at 26.74%, and the one-year note at 27.78%.
Interestingly, the government maintained these rates even though the auction results indicated that some investors were willing to purchase the treasury bills at lower rates. For instance, some investors offered to buy the one-year note at rates as low as 21.74%.
The 91-day bill continued to attract the highest patronage, accounting for about 79% of the total amount borrowed. In contrast, the one-year note remained the least attractive, representing only 3.68% of the total borrowed amount. This trend suggests ongoing low confidence in the long-term performance of the Ghanaian economy. Additionally, it may reflect a precautionary stance by investors to avoid locking funds with the government for extended periods, especially as treasury bills were not entirely excluded from the domestic debt exchange programme.
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Looking ahead, the government plans to borrow over GH¢5.3 billion in the next auction on July 19, 2024, indicating a heightened appetite for borrowing in the second half of the year. With national elections approaching, there is mounting pressure on the government to complete numerous projects to bolster its electoral prospects.
Furthermore, labour demands for improved conditions of service necessitate additional government spending. These pressures could compel the government to increase expenditure in the last five months of the year, although it will be under the watchful eye of the International Monetary Fund (IMF).
