A banking consultant, Dr. Richmond Atuahene, has raised concerns over Ghana’s declining Treasury bill rates, warning that the trend could weaken the cedi as investors seek alternative markets, particularly foreign exchange.
Speaking on Morning Starr with Naa Dedei Tettey, Dr. Atuahene explained that while the reduction in Treasury bill rates may seem beneficial for businesses borrowing from banks, it presents risks for investors who traditionally rely on T-bills for returns.
“For the ordinary person, it may not sound good. If people do not get the expected returns from Treasury bills due to the reduction in rates, they will look for alternative investments,” he said.
“And in this country, studies have shown that anytime Treasury bill rates drop significantly, people turn to the forex market. If that happens, we will see the cedi depreciating at a faster pace.”
The latest Treasury bill rates stand at approximately 15.86%, a significant drop from the nearly 30% returns seen in previous months. Meanwhile, Ghana’s inflation rate remains high at 23.1%, creating what Dr. Atuahene described as a “serious structural imbalance.”
He stressed the need for better coordination between the Ministry of Finance and the Bank of Ghana to ensure a balanced approach to monetary and fiscal policies. “We need policy synchronization,” he emphasized. “The Ministry of Finance must work closely with the Bank of Ghana to avoid unintended consequences that could destabilize the economy.”
Dr. Atuahene further warned that as investors shift their focus to forex markets, demand for foreign currencies, particularly the US dollar, could increase, putting additional pressure on the cedi.
“Any rational investor does not invest for losses,” he said. “If Treasury bill rates continue to decline while inflation remains high, investors will logically move their funds into forex, where they are more likely to see returns.”
The banking consultant advised policymakers to ensure that Treasury bill rates are pegged closer to inflation levels to maintain investor confidence and prevent a rush toward foreign currency investments.
“If inflation is around 23%, Treasury bill rates should be within that range to make them attractive,” he suggested.
