T-Bill rate reduction the benefit of DDE; to drive down inflation – Prof Lord Mensah
The recent reduction in Treasury bill rates in Ghana has been attributed to the successful execution of the government’s domestic debt exchange program.
Speaking on NorvanReports Twitter Space Conversation on the topic, “Is the IMF Bailout At Risk” on Sunday, March 12, 2023, Associate Professor Lord Mensah of the University of Ghana Business School, said the significant fall in T-Bill rates is a positive outcome of the program, which aimed to reduce the country’s total debt stock. He argues that the reduction in rates will benefit the private sector by lowering the cost of borrowing for production, resulting in lower prices for goods and services.
The government’s efforts to bring down Treasury bill rates seem to have paid off, as reports suggest that it has saved ¢220 million from the significant fall in Treasury bill yields. The government secured ¢6.15 billion from the auction, representing a 121.6% oversubscription. The pricing of the short-term instruments was reduced from 35% to a yield of 24.16% for the 91-day T-bills, while that of the 182-day and 364-day bills were sold at 26.55% and 27.54%, respectively. The interest cost for the March 7, 2023, T-bills auction was ¢762.4 million, with a Weighted Average Rate of 26.18%.
The reduction in T-Bill rates is significant, as it could have a positive impact on the country’s economy. Lower rates mean that the cost of borrowing for the government and the private sector is reduced, resulting in lower interest payments and increased investment in the economy. This, in turn, could lead to higher economic growth and job creation.
Furthermore, lower T-Bill rates could help to bring down the country’s high inflation rate, which has been a major concern for policymakers. The reduction in rates could lower the cost of borrowing for production, resulting in lower prices for goods and services. This, in turn, could help to reduce inflationary pressures in the economy.
The success of the domestic debt exchange program is a positive development for Ghana, as it shows that the government is taking steps to address the country’s debt burden and improve the economy. The program aimed to restructure the country’s debt portfolio, reduce the country’s total debt stock, and lower borrowing costs. The reduction in T-Bill rates is a clear indication that the program has been successful in achieving its objectives.
However, it is worth noting that the reduction in T-Bill rates is just one aspect of the government’s efforts to improve the economy. More needs to be done to address other economic challenges, such as the high unemployment rate, weak currency, and low foreign reserves. The government will need to continue implementing policies that promote economic growth, attract foreign investment, and create jobs.
The recent reduction in Treasury bill rates in Ghana is a positive development that could have a significant impact on the country’s economy. The success of the domestic debt exchange program is a clear indication that the government is taking steps to address the country’s debt burden and improve the economy. However, more needs to be done to address other economic challenges, and the government will need to continue implementing policies that promote economic growth and job creation.
