Ghana raised GHS 3.48 billion from short-term loans in its latest auction, missing its borrowing target by GHS 1.53 billion. The Ministry of Finance sought to raise GHS 5.01 billion from investors through treasury bills to fund state spending. The total cash accepted by the central bank represents only 69.5% of that goal.
Treasury bills are short-term IOUs that governments sell to citizens and banks to get quick cash. The government sells these bills across 3 separate time windows: 91 days, 182 days, and 364 days. Commercial banks and fund managers offered bids, but the state rejected some offers because lenders demanded higher interest payouts. Officials chose to accept less money across all 3 tenors rather than take on expensive debt.
The shortfall creates a direct challenge for state finances in 2024. Ghana currently relies almost entirely on local treasury bill auctions to manage its daily cash needs. International capital markets remain closed to Ghana following the 2022 sovereign debt default. Under the 3 billion dollar International Monetary Fund programme, Ghana must avoid excessive money printing by the Bank of Ghana. This rule leaves domestic treasury bills as the main way the state borrows cash to pay maturing debts.
Data published by the Bank of Ghana shows that interest yields moved in opposite directions across the 3 loan maturities. Investors asked for higher rates on longer notes to protect their capital against consumer price inflation. The Ministry of Finance kept a tight ceiling on the yields it would pay, which caused the large gap between the planned target and the final haul.
Market analysts at Databank and IC Securities noted that tight cash conditions inside commercial banks also reduced total bids. Commercial banks must keep 25% of their total deposits in cash reserves with the Bank of Ghana. This reserve rule locks up billions of cedis that banks would otherwise lend to the government. When banks hold less spare cash, demand at the weekly state auctions drops sharply.
State planners must now decide whether to raise borrowing targets in upcoming sales or cut budgeted state payments. Missing debt auction targets often forces the government to offer higher interest rates the following week to lure back cautious investors. Higher yields mean everyday taxpayers will eventually spend more money servicing government interest bills instead of building public roads and hospitals.