The Ghanaian government’s recent decision to reduce yields on its Treasury Bills by 500 basis points (5%) has been met with applause from financial experts, who believe it is a positive step towards addressing the high interest rates on government securities.
This development comes after the government rejected bids made for the 91, 182 and 364 day bills with yields over 35% in a recent T-Bills auction on March 3, 2023, citing concerns that the yields were too expensive for it to maintain.
According to sources, the government is now demanding bids for Treasury bills with yields less than 30%, indicating its commitment to reducing the cost of borrowing for itself and other investors. The decision to reduce yields is seen as a welcome development by experts, who note that the high interest rates on Treasury Bills were unsustainable for the government and could lead to debt distress if not addressed.
Mr. Joe Jackson, Director of Operations at Dalex Finance, is one of the experts who has expressed his support for the government’s decision. In an interview on Tuesday, he praised the government for taking a bold step towards addressing the high cost of borrowing, noting that the reduction in yields would help to alleviate the burden on the government and other investors.
The government’s decision to reduce yields on Treasury Bills could have a significant impact on the financial sector and the economy as a whole. By reducing the cost of borrowing, the government could free up resources to invest in critical sectors such as infrastructure and social services. Additionally, lower interest rates could stimulate economic activity and encourage private sector investment, ultimately leading to increased growth and job creation.
It is worth noting that the government’s decision to reduce yields comes after it incurred an interest cost of GHS 4.4bn on auctioned treasury bills worth GHS 33bn in just three months. This highlights the significant cost of borrowing for the government and the urgent need for action to address this issue.
Overall, the decision by the Ghanaian government to reduce yields on its Treasury Bills is a positive development that has been welcomed by financial experts. While it remains to be seen how this decision will impact the economy in the long term, it is clear that reducing the cost of borrowing could have significant benefits for the government, investors, and the broader economy.