New guidelines for primary dealers, bond market specialists and government securities market has been introduced by the Central Bank.
The new guidelines are to guide the purchase of government securities in the domestic market subject to provisions made in the Public Financial Management Act, 2016 (Act 921) along with other directives issued by the Finance Ministry.
Per the new guidelines, government securities will be denominated Cedis (Ghs) except when stated otherwise by the Ministry of Finance.
All payments with respect to subscription and redemption of securities will be made in the currency of issuance.
Regarding wholesale auctioning – the primary market for the issuance of Government of Ghana (GoG) and BoG securities – the BoG’s new guidelines stipulates that it will be opened to only primary dealers and as such all primary dealers must participate in the primary auction of Treasury bills by purchasing bills for their own accounts and for their trading books.
The Finance Ministry in accordance to the new guidelines, is to publish the Medium Term Debt Strategy (MTDS), the Annual Borrowing and Recovery Plan of the financial year and a quarterly rolling calendar for the issuance of government securities.
Based on the published calendar, the Ministry of Finance (MoF) shall announce within a week before an auction, the amounts and specific details of the financial instruments available at the next auction and their maturity profiles.
For the issuance of notes and bonds, a prospectus will also be published in the daily newspapers and on the websites of both the Finance Ministry and Central Bank.
Competitive bids will also be ranked in descending order of price or ascending order of discount or interest rate.
According to the Bank of Ghana, bills will be sold to applicants whose competitive bids are at or above the lowest price or at or below the highest rate at which the auction committee will decide that any competitive bid should be accepted.
In 1987, the BoG introduced the weekly treasury bills tender process. The securities market at that time was opened to banks, discount houses and the general public, although the public had to submit their applications through their respective banks.
From 1992, the BoG abolished all direct controls of monetary policy management and resorted primarily to Open Market Operation in conducting monetary policy.
In 1996, the BoG introduced the wholesale auction and a system of primary dealers in the government securities market intended to enhance the ability to achieve adequate funding for the GoG’s Public Sector Borrowing Requirement through the development of reliable primary and secondary markets.
In 2015, Government announced changes to the issue and trading of GOG securities, limiting the number of institutions that could act as Primary dealers.
Find below details of the BoG’s new guidelines:
Primary Dealers and Bond Market Specialists Guidelines 1 by Fuaad Dodoo on Scribd
