When you advise the government, they won’t listen. But how do they feel now that their so-called “artificial” drop in T-bill rates – engineered for propaganda – has been undone?
The Bank of Ghana(BoG), in today’s Monetary Policy Committee (MPC) release, has raised the policy rate (MPR) by 100 basis points, from 27% to 28%.
Typically, the MPR guides short-term interest rates like the T-bill rate. So, why the glaring inconsistency between the two? I warned repeatedly that the Finance Ministry was on the wrong path, attempting to control both price and quantity in the T-bill auction market – forcing rates down from 29% to as low as 15% for 91-day bills.
I also questioned why the Central Bank wasn’t more aggressive in managing excess liquidity through open market operations (OMO) or Discount Policy Operations (DIPO) to ensure price stability.
Well, at least the Governor of the Central Bank listens – unlike the Finance Minister. The latest MPC release signals plans to ‘introduce a 273-day instrument to strengthen the existing sterilization toolkit’, which I believe will aid the disinflation process.
The Finance Minister must take a cue: macroeconomic management is critical to national financial stability.
The ongoing policy incoherence between the Finance Ministry and the Central Bank exposes a worrying lack of coordination. If fiscal and monetary authorities don’t align, economic management suffers.
The recent undersubscription of T-bills in the last two auctions (21st & 28th March) speaks volumes. It’s time to learn some lessons.