The Institute of Public Policy and Accountability (IPPA) has urged the Finance Minister, Dr. Cassiel Ato Forson not to celebrate over the recent sharp fall in treasury bills, saying the decline in the interest rates is artificial.

In a statement, it argued that the lower treasury bill yields would have a rippling effect on the cedi as investors seek investments in high-yielding assets such as the dollar.

“The Institute of Public Policy and Accountability advise the finance minister not to rush to celebrate what we describe as not the true state of the interest rates regime despite seeking to score a political point. Ghana’s main fiscal problem is a lack of adequate revenue collection and borrowing for consumption.  We want to caution against excessive pressure on the Ghana cedi due to anticipated demand for the US dollar, thus reducing the gains achieved in bringing inflation down”.

“This assertion is supported by the Managing Director of Stanbic Bank and President of the Ghana Association of Banks, Kwamina Asomaning, who notes that the drop in the T-bill rates is a good move and should be encouraged by players in the banking industry, however, the development has brought some sudden pressure on the cedi as investors consider the American greenback as a safe haven to get returns on their investments”, the institute explained.

As a public policy organisation, it pointed out that a sustained fiscal discipline is crucial to ensuring that lower borrowing costs translate into economic expansion rather than excessive government spending and artificial reduction in yields.

Again, it mentioned that foreign exchange stability is a key factor in assessing the sustainability of lower domestic yields, adding.

“However, we do not think so as the local currency is far from achieving relative stability compared to the periods of 2018 and 2019. Historically, the sharp declines in interest rates have raised concerns about capital flight and exchange rate pressures”.

The government has been celebrating the recent reduction in treasury yields as a sign of economic recovery, which would lower the cost of domestic debt.

The institute, however, disagrees, urging the finance minister to work closely with the Bank of Ghana to improve the interest rate environment gradually.

“He should always factor in the downside risks when pursuing a policy. We want the reduction in the T-bill rates to correspond with a sharp decline in lending rates. This will significantly ease the cost of doing business. Therefore, we want to see a fiscal policy that drives revenue mobilisation but is also business-friendly”, it continued.

 Since January 2025, T-bill yields have fallen by more than 10%, but lending rates have remained high.

However, in the last two auctions, demand for the short-term instruments has waned because of the lower yields as investors seek other options to generate adequate return.