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Government Misses T-bill Target by 15%

The recent decline in demand for treasury bills is partly due to a Bank of Ghana policy to revise the Cash Reserve Ratio (CRR) for banks.

The government failed to meet its borrowing target for treasury bills during the regular weekly auction held on Friday, May 24. While aiming to raise GH¢4.85 billion, it only secured approximately GH¢4.12 billion, resulting in a shortfall of 15.4%.

This target was one of the highest since the beginning of April, and with declining demand for treasury bills, it was anticipated that the government might struggle to meet its target.
For the first time in many weeks, the interest rates on all but one of the bills remained the same.

The 91-day treasury bill rate held steady at 25.09%, while the 182-day bill also stayed at 26.94%. The one-year note saw a marginal reduction, decreasing from 27.95% to 27.94%. These rates remained unchanged from previous auctions because the government was unable to meet its target.

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Of the total amount borrowed, 74.2% was raised through the 91-day treasury bills, 19.3%
through the 182-day bills, and 6.5% from the one-year note. This distribution suggests that investors prefer lending to the government for shorter durations, indicating less confidence in the economy over the long term. The government plans to borrow a smaller amount, approximately GH¢2.72 billion, at the next auction on Friday, May 31.

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The recent decline in demand for treasury bills is partly due to a Bank of Ghana policy to revise the Cash Reserve Ratio (CRR) for banks. During its Monetary Policy Committee Meeting in March this year, the Central Bank adjusted the CRR percentage for banks based on their Loan-to-deposit ratios. This directive is believed to have compelled banks to reduce their purchases of treasury bills to increase their reserves in compliance with the new requirement.

This adjustment has made it difficult for the government to meet its treasury bill targets whenever the desired amount exceeds GH¢4 billion.

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In a related development, Ghana’s debt stood at GH¢658.6 billion by the end of February 2024, up from GH¢636 billion in January. This represents a Debt to Gross Domestic Product (GDP) ratio of 62.7% in February, compared to 60.5% in January.

The component of the debt borrowed domestically (Domestic Debt) increased to GH¢278.7 billion in February from GH¢268.4 billion in January, representing a Debt to GDP ratio of 26.5% compared to 25.5%.

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