Interest rates-reset key to private sector growth

Amid the current economic crisis brought about by the COVID-19 pandemic and Domestic Debt Exchange Programme, one key solution for supporting growth of the private sector is resetting interest rates in the economy, Managing Director-Stanbic Investment Management Services, Kwabena Boamah, has advocated.

Speaking during a panel discussion at The Money Summit 2023 organised by B&FT, Mr. Boamah emphasised that investing in long-term investments is the way to beat inflation rather than relying on Treasury bills and fixed deposits.

“In March, we saw Treasury bill rates drop and people were asking questions: why should the rates drop when inflation is about 45%? The real truth is that we can’t have Treasury bills hedge investors over inflation. That’s an anomaly in the economy, and it has to be fixed,” he said.

Mr. Boamah further stressed the need to ensure that policymakers support the private sector, as borrowing at rates of 30 percent is too high to support businesses’ growth and expansion.

“If we were to reset interest rates as an economy, we would be able to fund the private sector; and the private sector companies will not be set to fail because they are not borrowing at 30 percent,” he explained.

Notably, during last week’s Treasury auction on the primary, the 91-day bill experienced a 31-basis-point increase – reaching 20.26 percent while the 182-day bill rose by 12 basis points to 22.83 percent. Similarly, the 364-day bill inched up by 10 basis points to 27.36 percent. The rising money market yields continue attracting investors to government bills. The oversubscription of Treasury bills for a sixth consecutive week demonstrates the strong demand for these instruments.

Government’s successful auction, surpassing the target size, indicates investor confidence amid limited options and provides the necessary funds to cover maturing face values of Treasury bills.

Boamah also called for commercial banks to remain focused on meeting their customer deposit obligations, so as to ensure they can become more profitable once the economy recovers.

“The positive indications and trust that the economy will bounce back should give us confidence as we move forward,” he added.

The panel discussion was part of The Money Summit’s third edition, which explored emerging trends and opportunities in the financial industry.