Last week’s under-subscription of treasury bills offered by government have shifted concerns of financial market analysts and economists from a flagging appetite by institutional investors for government debt to worries that this may be affecting the state’s ability to meet its fiscal obligations under its 2026 budget. Unlike several previous auctions, government accepted essentially all bids submitted by investors raising GH¢6.8 billion but even this fell short of a target of about GH¢8.58 billion.
The Treasury has repeatedly failed to achieve its auction targets many times this year – especially since March – but on several occasions, still deliberately rejected portions of bids made, that it considered too expensive. Against this backdrop, the decision to accept all bids at the June 19, 2026 Treasury bill auction has attracted considerable attention, raising questions about whether government financing needs have become more pressing.
The government’s issuance calendar for March to June 2026 made clear that domestic borrowing would remain an important component of financing the budget. However, the strategy also emphasized reducing over-reliance on short-term Treasury bills in favour of medium and long-term securities, consistent with Ghana’s debt management strategy following the Domestic Debt Exchange Programme (DDEP). Government planned to issue approximately GH¢15.23 billion in new domestic debt during the period while rolling over maturing obligations.
In practice, however, market conditions have complicated this strategy.
Less money borrowed than planned
Beginning in March, several Treasury bill auctions fell below government targets. While investor demand remained substantial, government frequently declined to accept all bids submitted, particularly where investors demanded higher yields than officials considered consistent with the ongoing decline in interest rates. For example, the March 19 auction attracted GH¢3.73 billion in bids but government accepted only GH¢3.26 billion, rejecting nearly half a billion cedis worth of offers, particularly on the 91-day bill.
This pattern continued into May and early June. The auction held on May 29, for instance, attracted GH¢4.92 billion against a target of GH¢5.89 billion. Government accepted GH¢4.87 billion, resulting in a financing shortfall while still rejecting some bids, especially on longer maturities.
These decisions reflected a deliberate policy choice rather than an inability to borrow. Officials have consistently sought to maintain downward pressure on Treasury bill rates. Since the beginning of 2026, yields have fallen dramatically compared with levels prevailing immediately after the domestic debt restructuring, supported by easing inflation, improved fiscal credibility and relatively abundant liquidity within the banking system. Accepting higher-priced bids risked reversing this trend and increasing government’s future debt servicing costs.
Money market participants generally interpreted government’s selective acceptance policy as a signal that the Treasury was prioritising cost over volume. In other words, officials appeared willing to tolerate temporary funding shortfalls rather than validate higher interest rate expectations in the market.
Nevertheless, this approach inevitably carries risks.
…and so less to spend
Repeated under-subscription means government must either draw down cash balances, delay certain expenditures, increase reliance on other financing sources, or seek to recover missed financing at subsequent auctions. While these measures may be manageable over short periods, persistent underfunding eventually creates pressure on cash management, especially as expenditure commitments under the budget accelerate during the fiscal year.
Instructively, Ghana’s government spent barely three quarters of what it had planned for the first three months of 2026, the widest gap between budget and actual spending in at least a decade, going by an analysis of official data. Figures from the Ministry of Finance show the money was held back mostly on capital expenditure, goods and services, debt repayment and support for the poor.
Counting arrears and debt principal, spending came to about GH¢66 billion between January and March, against a plan of GH¢90 billion. That is roughly 73 percent of the target, leaving some GH¢24 billion unspent. Even on the narrower measure that leaves out debt principal, the government got through only about GH¢63 billion of a planned GH¢81 billion expenditure, or 78 percent.
Not since 2017 has the first quarter actual public expenditure profile, compared against the budgetary plan looked this weak.
But the evidence is inconclusive
Despite this seeming evidence however Ministry of Finance officials insist that the situation is not one of insufficient domestic financing to see the 2026 budgetary plan through.
They point out that accepting all bids last week is because government currently places greater value on securing available liquidity than it did during earlier auctions. This suggests that the Treasury’s willingness to accept every bid last week indicates there was little scope or willingness – with regards to liquidity rather than net financing.- to continue rejecting offers simply to enforce lower yields.
Financial analysts argue that seasonal fiscal factors likely matter too. Mid-year typically brings increased expenditure obligations, including transfers to statutory funds, capital spending commitments and payments to contractors and suppliers. Cash flow requirements therefore tend to intensify, making financing gaps more problematic than earlier in the fiscal year.
They also suggest that government may be attempting to rebuild cash buffers ahead of larger refinancing obligations later in the year. Accepting all available market funding can therefore represent prudent liquidity management rather than evidence of financial distress.
Another possibility is that the bids submitted at the June 19 auction may simply have aligned more closely with government’s pricing expectations. If investors accepted lower yields than in previous weeks, there would have been little reason for authorities to reject bids. Without a significant increase in accepted yields, accepting all bids does not necessarily indicate desperation.
Analysts therefore generally caution against interpreting a single auction in isolation. Instead, they suggest monitoring whether the Treasury continues accepting all bids over several consecutive auctions and whether interest rates begin rising meaningfully. A sustained pattern of accepting higher-cost funding would provide stronger evidence that financing pressures have increased materially.
Overall, the June 19 decision possibly reflects a subtle shift in emphasis rather than a dramatic deterioration in government’s financing position. The Treasury may simply be increasingly willing to maximise available domestic financing when market conditions permit – with regards to reasonable yields demanded by investors – recognising the importance of maintaining adequate liquidity as budget implementation gathers pace.
By: Toma Imirhe / businesspostonline
