Joe Jackson urges investors to be wary of Gov’t transactions
Joe Jackson, Director of Operations at Dalex Finance, has issued a cautionary message to investors, urging them to exercise prudence when engaging in government transactions due to the prevailing economic difficulties.
In light of the government’s financial constraints, Jackson has highlighted the urgent need for investors to approach such transactions with utmost care, particularly when considering government securities such as Treasury Bills.
Despite their popularity as a preferred investment vehicle following their exclusion from the debt restructuring process, Mr Jackson has advised investors to be mindful of the associated risks.
Mr Jackson underscored the government’s current financial predicament, emphasizing that it remains financially strained and is likely to continue to face such challenges for the foreseeable future, hence raising concerns about the government’s ability to fulfill its financial obligations to investors.
He pointed to the disparity between the government’s 25% interest payments on Treasury Bills and its previous failure to meet coupon rates of 19% on bonds.
“Government is still broke and will remain broke for quite sometime, and so we should be wary of Government transactions, particularly the Treasury Bills. Government is promising 25% interest payments on Treasury Bills, but this is the same Government that couldn’t pay 19% coupon rates on bonds,” he quipped speaking at the Canada Ghana Chamber of Commerce Business Webinar.
Meanwhile, Professor Lord Mensah, an Economist and Finance Lecturer at the University of Ghana Business School, has hinted at a potential restructuring of Treasury Bills by the government to reduce the high-interest rates on the short-term debt security. Professor Mensah’s remarks came in the wake of the government’s unsuccessful attempt to significantly reduce interest rates on domestic bonds through its first round of debt restructuring.
Professor Mensah drew attention to the substantial difference between bond interest rates, which range from 8% to 10%, and the notably high yields of 25% offered by Treasury Bills, emphasizing the need for measures to address this divergence and establish a more sustainable interest rate environment.
Speaking further during the Business Webinar, Mr Jackson advised investors and businesses to exercise patience in their investment decisions, given the prevailing uncertainty and volatility in the economy. In such challenging times, he stressed the importance of cost reduction and maintaining lean operations.
Furthermore, Mr Jackson forecasted a depreciation of the Cedi to GHS 15 per $1 by year-end, and therefore urged investors to hold onto the dollars they have at hand at the moment. This prediction aligns with his previous assertion that the Cedi’s relative stability against the dollar will gradually diminish as pressure on the dollar intensifies.
“Be patient with investment decisions because there are uncertain and volatile times ahead. Cut down on costs and stay lean,” he remarked.
“And if you have dollars, hold onto it, because the cedi will definitely depreciate close to the end of the year when pressure on the dollar mounts,” he added.
As investors navigate the current economic landscape, it is essential to carefully consider these insights and forecasts. Heightened uncertainty and volatility require a cautious and measured approach to investment decisions.
