The recent sharp fall in treasury bills has caught the attention of the Institute of Public Policy and Accountability (IPPA), who have advised Finance Minister, Dr. Cassiel Ato Forson, not to celebrate just yet. According to IPPA, the decline in interest rates is artificial and could have negative implications for the economy.
In a statement released by IPPA, they expressed concerns that the lower treasury bill yields could lead to investors shifting their focus to high-yielding assets such as the dollar. This could put pressure on the cedi and undermine the gains made in reducing inflation.
The Managing Director of Stanbic Bank and President of the Ghana Association of Banks, Kwamina Asomaning, supported IPPA’s stance, acknowledging that while the drop in T-bill rates is positive, it has also resulted in increased pressure on the cedi as investors seek safer investment options like the US dollar.
IPPA emphasized the importance of sustained fiscal discipline to ensure that lower borrowing costs translate into economic growth rather than excessive government spending. They also highlighted the need for foreign exchange stability to support lower domestic yields, citing concerns about potential capital flight and exchange rate pressures.
The institute called on the finance minister to collaborate closely with the Bank of Ghana to improve the interest rate environment gradually. They stressed the importance of aligning the reduction in T-bill rates with a corresponding decrease in lending rates to promote a more business-friendly environment and reduce the cost of doing business.
Despite the significant decrease in T-bill yields since January 2025, lending rates have remained high, leading to a decline in demand for these short-term instruments in recent auctions. Investors are now exploring alternative options to generate adequate returns.
In conclusion, IPPA’s cautionary stance serves as a reminder of the complexities involved in managing interest rates and the importance of balancing fiscal policies to support economic growth. It remains to be seen how the government will address these challenges and ensure a sustainable financial environment for businesses and investors.
