Financial analyst Prince Obiri Yeboah predicts that Ghanaians, especially business owners, should not anticipate a decrease in the interest rate below 30%.
He explained that the reason why the interest rate has increased is due to a multiplicity of factors.
He said the banks in Ghana use the government policy rate in determining the interest rate.
“So as we speak, the government and financial institutions are struggling over the money in the system, to the point that the government is buying T-Bills at a very high price.”
The economist stated that the government treasury bill is underperforming, meaning the government is not making the expected returns on treasury.
The government has missed its treasury bill target for the fifth consecutive week.
The situation has created some concerns over waning local investor confidence in the economy.
For the tender held on July 12, the government missed its target of GH¢4.72 billion by raising GH¢4.4 billion.
For the auction held on July 19, the government again missed its target of GH¢5.3 billion by raising GH¢3.87 billion.
Mr. Prince Yeboah, in reacting to this, explained that because of this, the government has been forced to purchase treasury bills at a higher rate. If the government is borrowing from the market at a rate of 24 percent, don’t expect bank interest rates to fall below 30 percent.
“So if the government is purchasing T-Bills at a rate of 24 percent, then the policy rate of the government is around 29 percent, which they use in determining the rate at which they borrow from commercial banks. You cannot give loans to banks below 30 percent. So it is an area where the government must take steps to address it immediately.
One way to address this is to reduce government expenditure. Our recurrent expenditures are always high. As we prepare for the elections, you and I know that we will overspend. They are currently sending machines to some communities to repair deplorable roads there. They are doing this just to impress the voters so they are retained. When this happens, we will certainly overspend beyond our budget. Then the major one that some economists shy away from is borrowing without prudent use of the loans.
He said, we take huge loans with the aim of investing them in road projects, but we construct shody roads that don’t last and go back for other loans to repair the shoddy roads.
“This way of reckless borrowing he lamented is having a negative impact on the economy and it was time we deal with it once and for all,”‘ he concluded.
By: Rainbowradioonline com/Ghana
