The Member of Parliament for Tano North Constituency, Gideon Boako, has raised concerns over the recent decline in Treasury bill (T-bill) rates, arguing that while it is commendable it does not align with the country’s economic fundamentals.

He made these remarks in Parliament on Tuesday, March 4, while contributing to President Mahama’s State of the Nation Address (SONA).

Dr Boako pointed out that key economic indicators such as inflation and the Monetary Policy Rate (MPR) suggest that the current decline in T-bill rates is out of place or a dislodgement of the Bank of Ghana monetary policy rate (MPR).

He explained that the prevailing inflation rate stands at 23.5%, the MPR is at 27%, while the 91-day T-bill is at 19.76%, making the drop in rates an anomaly.

“First, the decline is not consistent with the economic fundamentals – inflation at 23.5% and MPR at 27% and 91-day T-bill at 19.76%,” he stated.

He further explained that this situation results in negative real returns for commercial banks that invest in these bills, making it an unattractive option for financial institutions.

According to Dr. Boako there is excess liquidity in the economy that ought to be mopped up but the government must open up the long end of the bond market to allow for more options for investors rather than what appears to be a restriction and 'false' direction of all investments to the short end market, that is the Treasury Bill market.

Dr. Boako argues that since current investments in the T-bill market offer a negative real return, if this persists without any alternative options, investors may likely move to other unwarranted markets like the foreign exchange markets which could further depreciate the cedi.

Dr Boako, therefore, urged the government to adopt a more coherent approach to monetary policy to ensure that interest rates reflect economic realities.

He stressed the need for policies that will not only stabilise the financial market but also attract sustainable investment in the economy.