By: Grace Zigah
President John Dramani Mahama led government is facing renewed pressure on its short-term borrowing strategy after falling significantly short in its latest Treasury bill (T-bill) auction, raising just GH¢4.37 billion against a target of GH¢6.66 billion.
The GH¢2.29 billion shortfall represents a sharp increase from the previous week’s undersubscription of GH¢353 million—raising red flags about waning investor confidence and liquidity in the domestic debt market.
Investor Preference for Short-Term Safety
According to data from the Bank of Ghana, investors continued to show a strong preference for the shortest-term instrument, with the 91-day bill receiving the highest interest.
The government accepted all bids for the 91-day instrument, securing GH¢2.65 billion.
However, demand for longer-dated instruments remained weak.
The 182-day bill brought in GH¢1.67 billion, while the 364-day bill saw a near-flat turnout, attracting only GH¢48 million in total bids.
The skewed investor appetite toward shorter durations suggests caution among market participants—likely due to uncertainty over inflation trends, exchange rate risks, and fiscal discipline in the lead-up to the 2025 mid-year budget review.
Despite the auction’s underperformance, yields on all three tenors declined slightly, signaling that the Bank of Ghana’s disinflation-focused monetary policy might be gradually taking hold.
The yield on the 91-day bill held steady at 14.79%, while the 182-day bill dipped modestly by 3 basis points to 15.45%.
The 364-day instrument, despite its poor uptake, saw a slightly more pronounced decline of 12 basis points to 15.79%.
Analysts interpret these movements as tentative signs of easing inflation expectations—but caution that they may not be enough to restore market confidence.
Historical Context: A Pattern of Rising Risks
This is not the first time Ghana’s short-term borrowing efforts have encountered challenges.
Since late 2023, the government has increasingly relied on T-bills to finance budget deficits and roll over maturing debts, following its 2022 decision to suspend interest payments on external commercial debt under the domestic debt exchange programme (DDEP).
While the strategy provided short-term relief and ensured liquidity within the banking sector, it also deepened the government’s exposure to rollover risks.
The recent back-to-back auction underperformances now indicate growing fatigue among primary market participants and signal that appetite for government debt may be narrowing.
A Crucial Test Ahead
The upcoming auction under Tender 1958, scheduled for later this week, is targeting an even higher amount—GH¢7.58 billion.
This target marks a GH¢919 million increase over the current week’s goal, placing more pressure on the government to attract investor participation and avoid a funding crunch.
Whether the Finance Ministry can reverse the trend remains to be seen.
Analysts warn that continued underperformance could jeopardize the government’s ability to meet maturing debt obligations and fund public expenditures, especially with mid-year fiscal targets looming.
What’s Next for Policy Makers?
To address the mounting concerns, experts say the government may need to:
Offer more competitive yields to attract longer-term investors,
Increase transparency in fiscal management to boost investor confidence,
And communicate a clearer medium-term debt strategy aligned with IMF-backed reforms.
In the absence of such confidence-boosting measures, the threat of persistent undersubscription could undermine debt sustainability efforts and erode gains made under the government’s post-DDEP economic recovery programme.
While slight yield drops may reflect optimism about inflation control, the glaring undersubscription in Treasury auctions underscores deeper structural weaknesses.
The government’s next move in the debt market will be pivotal—not just for short-term cash flow—but for signaling whether Ghana’s fiscal framework remains credible in the eyes of investors.
The coming weeks will test not only the market’s appetite but also the resilience of the government’s debt strategy amid growing public scrutiny and international economic headwinds.
