The Member of Parliament for Tano North Constituency, Gideon Boako, has raised concerns over the recent decline in Treasury bill (T-bill) rates, arguing that while commendable, it does not align with the country’s economic fundamentals.
He made these remarks in Parliament on Tuesday, March 4, while contributing to President Mahama’s State of the Nation Address (SONA).
Dr. Boako pointed out that key economic indicators such as inflation and the Monetary Policy Rate (MPR) suggest that the decline in T-bill rates is inconsistent with the Bank of Ghana’s monetary policy framework.
He noted that the prevailing inflation rate stands at 23.5%, the MPR at 27%, while the 91-day T-bill is at 19.76%, making the drop in rates an anomaly.
“First, the decline is not consistent with the economic fundamentals – inflation at 23.5%, MPR at 27%, and 91-day T-bill at 19.76%,” he stated.
Dr. Boako explained that this situation results in negative real returns for commercial banks that invest in T-bills, making it an unattractive option for financial institutions.
According to him, there is excess liquidity in the economy that ought to be mopped up. However, he urged the government to open up the long end of the bond market to create more investment options rather than directing all investments toward short-term instruments like T-bills.
Dr. Boako warned that since current T-bill rates offer negative real returns, investors may shift to other markets, including the foreign exchange market, which could further depreciate the cedi.
He, therefore, called for a more coherent monetary policy approach to ensure that interest rates reflect economic realities and attract sustainable investments.
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