The Head of Finance at UMB Capital, Nelson Cudjoe Kuagbedzi, has referred to as on the federal government to offer readability on its borrowing technique within the medium time period following a noticeable drop in Treasury invoice charges.
Talking on The MarketPlace hosted by Daryl Kwawu, Mr Kuagbedzi expressed considerations concerning the current sharp decline in rates of interest.
“The sharp drop in current weeks reveals a scarcity of urge for food by the federal government to borrow from the short-term market,” Mr Kuagbedzi stated.
Within the final Treasury invoice public sale, rates of interest dropped to fifteen%, reflecting a major discount in demand for these short-term authorities securities. Regardless of this decline, the federal government recorded a 12 per cent over-subscription by way of investor bids.
Economists have warned that this pattern might pose financial dangers, particularly because it seems to diverge from different key financial indicators.
One in all these specialists, Dr Priscilla Twumasi Baffour, identified that the discount in treasury invoice charges just isn’t according to inflation and the Financial Coverage Charge (MPR), which stay key benchmarks within the nation’s financial outlook.
“The discount just isn’t in sync with different key financial indicators akin to inflation and the Financial Coverage Charge,” Dr Twumasi Baffour stated.
In response to those considerations, Mr Kuagbedzi emphasised the necessity for the federal government to deal with the market distortions and align its borrowing technique with the broader financial coverage goals.
He careworn that for the nation’s fiscal and financial indicators to align, the federal government’s borrowing technique have to be in step with these broader objectives.
“Authorities’s borrowing technique should align with financial coverage goals in order that different financial indicators slot in,” he stated.
Current knowledge from the Ghana Statistical Service reveals that annual shopper inflation eased to 23.1% in February 2025, down from 23.5% in January. This decline is partly attributed to a extra secure change price.
Nonetheless, the Financial Coverage Charge stays at 27.00%, which provides to the considerations concerning the mismatch between Treasury invoice charges and different financial indicators.
Mr Kuagbedzi warned that if treasury invoice charges proceed to say no with out addressing the market distortions, traders might draw back from authorities securities looking for extra worthwhile funding alternatives.
“Presently, traders are susceptible to adverse actual charges of return. They are going to at all times search higher returns on investments, particularly with regards to authorities securities. If this continues, it might affect pension fund managers, banks, and insurance coverage firms, who closely depend on these investments,” he defined.
The affect of this pattern might additionally have an effect on the federal government’s skill to lift crucial funds within the quick time period to refinance maturing obligations.
Trying forward, the federal government is about to borrow GH¢6.14 billion on the treasury market on Friday, March 21, 2025.
The funds shall be raised by means of the issuance of 91-day, 182-day, and 364-day Treasury payments to cowl GH¢5.90 billion in maturing payments. This upcoming issuance is decrease than the GH¢8.77 billion raised earlier within the week on Monday, March 17, 2025.
Analysts predict that yields will possible proceed on a downward path, though a slowdown within the compression of charges to the 100–200 foundation factors vary is predicted.
As the federal government prepares to lift funds to fulfill its obligations, the necessity for clear communication concerning its borrowing technique stays essential to sustaining investor confidence and total financial stability.
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