Gov’t misses T-Bills auction target for first time in months over debt restructuring concerns
Government, for the first time in months, has missed its target for the auction of the 91 day and 182 day treasury bills.
Government, prior to the announcement of an IMF bailout in July, missed its weekly auction targets in the issuance of the short term debt securities (91, 182 and 364 days treasury bills).
News about a possible IMF bailout re-injected investor confidence in the economy which was evidenced by the oversubscription of government’s short term debt instruments.
However, recent talks about a domestic debt restructuring by government, has raised concerns among investors, particularly local investors – banks, pension funds, insurance companies etc.
The domestic debt restructuring by government will involve either a cut in principal loans owed investors or a reduction in interest on loans.
Banks, per reports, are likely to be the most affected by the domestic debt restructuring given their high exposure to government debts.
A domestic debt restructuring is likely to significantly impact the capital adequacy ratio of banks which measures their ability to absorb losses arising from bad loans.
Some analysts in the country, have noted that a heavy domestic debt restructuring by government will result in most banks being insolvent.
Auction target for Tender 1817 issued last Friday, September 23, was GHS 1.33bn. Government however, was only able to raise some GHS 1.19bn, a shortfall of GHS 139m.
Bids tendered for the 91 day and 182 day bills amounted to GHS 948 and GHS 244m respectively with government accepting all bids tendered.
The 91 day and 182 day bills were auctioned at interest rates of 30.5% and 31.6% respectively.