Investor caution amid election uncertainty caused a 20% treasury bill undersubscription, impacting government funding and complicating short-term financial obligations
The government for the fourth consecutive week, has missed its treasury bill borrowing target despite another raise in interest rates.
The government planned to borrow a total of GH₵ 6.49 billion from the treasury bill market to fund its day-to-day activities. However, the auction results as published by the Bank of Ghana reveal that the government was able to mobilize only GH₵ 5.20 billion. The target was missed by GH₵ 1.3 billion representing a shortfall of 20%.
The auction results reveal that all bids tendered were accepted but could not meet the target. About 57.84% of the total bids came from the 91-Day Treasury Bill which accrued GH₵ 3.01 billion. The 182-Day Bill also accrued GH₵1.82 billion representing 35.24% of the total bids. The 364-Day Bill also contributed GH₵ 359.55 million which represents a paltry 6.92% of the total funds accrued by the government.
The under-subscription of the government bills came amidst another rise in interest rates but unfortunately, the hikes could not lure investors.
This GH₵1.3 billion shortfall representing 20% recorded in the election compares to GH₵2.2 billion shortfall representing 37% recorded in the week before.
The consecutive shortfall in government borrowing in the weeks prior to elections and the elections week, analysts say can be attributed to a drop in investor confidence due to uncertainty surrounding the elections.
The political uncertainties ahead of the elections have possibly heightened investor caution as there is a risk of fiscal indiscipline, potential policy shift, and a change in government.
As a result, many investors prefer to adopt a “wait-and-see approach” or demand more higher yields for their participation, which the government may not be willing to meet.
The undersubscription of treasury bills could significantly impact Ghana’s economy.
With reduced inflows from these instruments, the government might struggle to meet its short-term financing requirements. This could result in delays in paying contractors, funding critical projects, and managing its operational budget. Additionally, the government may need to resort to costlier borrowing alternatives, further exacerbating the country’s already challenging public debt situation.
