BoG raises $1.8bn from 14 day, 56 day bills at 29.8%
The Bank of Ghana (BoG) has recently held an auction of 14-day and 56-day bills, raising a total of GHS 10.6bn ($1.8bn) at interest rates of 29.5% and 30.2% respectively (an average interest rate of 29.8%).
The bills were auctioned on March 29, 2022, and the results revealed that GHS 8.3bn and GHS 2.3bn were raised from the 14-day and 56-day bills respectively.
Central bank bills are widely used by central banks as a monetary policy tool to regulate money supply by managing the liquidity of the banking system through the sale of short-term securities on the primary market.
The funds raised from the auction of the BoG bills are typically directly loaned to the government to support its short-term financing needs.
The recent BoG auction results, however, did not indicate the value of bids made by banks, insurance firms, and pension funds for the bills, nor did it reveal whether the BoG was able to meet its target with the auction as both amounts were not stated by the central bank. The lack of transparency surrounding the auction results may raise questions about the effectiveness of the BoG’s monetary policy tools and the overall efficiency of the country’s financial system.
Furthermore, the interest rates set by the BoG on the bills are a key factor that determines the monetary policy stance or rate. The high interest rates of 29.5% and 30.2% set for the 14-day and 56-day bills respectively may indicate the BoG’s intention to maintain a tight monetary policy stance to curb inflationary pressures in the Ghanaian economy. However, such high interest rates may also have adverse effects on the economy, as they increase the cost of borrowing and reduce consumer and investor confidence.
The recent auction results may also reflect the country’s broader economic challenges, such as high inflation, currency depreciation, and low foreign reserves. According to the International Monetary Fund (IMF), Ghana’s inflation rate has remained above the BoG’s target range of 8% (+/-2%) since early 2021, reaching 52.8% in March 2023.
The BoG’s recent auction of bills highlights the challenges faced by the Ghanaian economy and the central bank’s efforts to address these challenges through monetary policy tools.
