4th Consecutive T-Bills Shortfall Putting Government Budget Funding at Risk: Is It Time to Raise Rates?

It appears that there could be a major threat to the government’s ability to finance its programs in the budget as a major source of funding, Treasury Bills (T-bills), continues to show signs of distress.

The government has failed to meet its target for the fourth consecutive week, raising critical concerns about how it will finance key budgetary commitments in the months ahead should the trend continue.

What Numbers Say

According to official auction data, between May 30 and June 20, as analysed by The High Street Journal, the government aimed to raise GHS 22.9 billion through short-term debt instruments. However, it only secured GHS 19.6 billion in investor bids.

This marks a shortfall of about GHS 3.3 billion, reflecting an undersubscription rate of 14.41%.

While the shortfall itself is troubling, the underlying challenge is even more acute. Not all bids submitted are accepted by the government. In some cases, some bids tendered by investors were rejected, either due to unfavourable rates or other reasons. In effect, despite the bids falling short of the planned target, the government walked away with even a lesser amount.

This means the actual amount accepted often falls further below what the government needs, compounding, though recovering, but still fragile fiscal situation.

Inactive Bonds Market Deepen Situation

The situation is even more concerning because Ghana’s domestic bond market remains effectively closed following the Domestic Debt Exchange Programme (DDEP). Since restructuring its local debt in 2023, the government has yet to fully re-access the long-term market to raise new funds.

This leaves the T-bills as the sole domestic financing tool; however, the fourth consecutive undersubscription raises questions about their sustainability if nothing is done to rescue the situation.

With mounting pressure to meet salary payments, statutory transfers, and operational costs, questions are being raised about the government’s ability to plug its growing financing gap without external bailouts or drastic fiscal adjustments.

Are Falling Interest Rates to Blame?

Market watchers say one key factor behind the low investor participation is the steady decline in T-bill interest rates over recent months.

The government, in an effort to reduce its borrowing costs, has allowed rates to fall significantly. Some industry players say that this has made the instruments less attractive to investors, especially in a high-inflation environment.

For instance, yields on the 91-day, 182-day, and 364-day bills, once pushing above 30% at the beginning of the year, have gradually eased, dampening enthusiasm from both institutional and retail players.

In the absence of competitive returns, investors are holding cash or seeking higher-yielding opportunities elsewhere.

Is it time for a Rethink of the Rates?

Given the need for the government to fund its reset agenda, the critical question begging for an answer is whether it is time for the government to consider raising interest rates.

This is because the government needs to meet its target, which is determined by the needs of the state. Failure to meet the target means that some funding requirements or payment of the obligations of the government will be affected.

However, if investors don’t find the yields worthwhile, they simply won’t show up.

A Systemic Warning Sign

Many analysts believe that the consistent T-bill undersubscriptions are not just weekly market updates. They are early warning signals of a systemic funding crisis. If left unchecked, this trend could undermine the government’s ability to implement critical programmes, support development spending, or even stabilise the macroeconomy.

Without access to the bond market, limited external budget support, and now a cooling T-bill market, the government is walking a tightrope.

This means that a correction course may be necessary, whether through higher interest rates, urgent fiscal consolidation, or renewed international engagement.

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