Joe Jackson warns Government of perils in using T-Bills to finance long-term debt
The Director of Operations at Dalex Finance, Joe Jackson, has raised alarm over the practice of employing funds from T-Bills, a short-term debt instrument, to finance long-term debt obligations.
Speaking during the NorvanReports’ Townhall Twitter Space Conversation on the topic, “2023 Mid-Year Budget: Concerns and Expectations,” Mr. Jackson sounded a cautionary note, describing the utilization of T-Bills for long-term debt financing as a “disaster waiting to happen.”
Citing the inherent risks in the T-Bills market, Mr. Jackson expressed grave concern over the potential threats posed to the economy. He underscored that the Government’s continued accumulation of costs in the T-Bills market, driven by a lack of commitment to reducing expenditure, has resulted in elevated yields on T-Bills and diminished yields on long-term debts.
This unsettling imbalance heightens vulnerabilities within the T-Bills market, thereby creating a precarious situation for overall economic stability.
In light of the upcoming mid-year budget review, scheduled to be presented by Finance Minister Ken Ofori-Atta on July 27, 2023, Mr. Jackson demanded clarity on several critical fiscal matters.
Foremost among his expectations is a detailed elucidation of the Government’s strategy to address the GHS 60 billion deficit that looms large in the 2023 budget.
Moreover, Mr. Jackson stressed the urgency of explicating the Government’s plan to bolster the financial sector amidst the prevailing challenging circumstances. Of particular concern is the apparent inadequacy of funds in the Financial Stability Fund, despite prior commitments to channel monetary support into the Fund. Additionally, the Bank of Ghana’s inability to assist banks, due to the securitization of its GHS 77 billion in financing the Government’s deficit, further exacerbates the financial sector’s predicament.
Furthermore, the Dalex Finance Operations Director pressed for clear and concise timelines for resolving the prevailing economic uncertainties in the interests of fostering an environment of stability and predictability, especially for businesses.
Market participants and stakeholders alike await the forthcoming mid-year budget review with heightened scrutiny, seeking assurances that the Government will address these pressing concerns, steer the economy towards a path of sustainable growth, and restore confidence in the nation’s fiscal prospects.
