Economist Dr. Gideon Boako has raised concerns over a deepening policy disconnect between the Finance Ministry and the Bank of Ghana, warning that such incoherence could undermine Ghana’s economic stability.
His remarks follow the Monetary Policy Committee’s (MPC) decision to raise the policy rate (MPR) by 100 basis points, from 27% to 28%, a move he argues directly contradicts the government’s fiscal approach.
Dr. Boako says the Finance Ministry’s handling of the Treasury bill (T-bill) market has been allegedly artificial, suppressing T-bill rates and pushing them down from 29% to as low as 15% in an attempt to control borrowing costs.
However, he asserts that the government’s strategy has backfired, as recent undersubscriptions in the last two T-bill auctions indicate waning investor confidence.
“When you advise the government, they won’t listen. But how do they feel now that their so-called ‘“’artificial” drop in T-bill rates – engineered for propaganda – has been undone?” he stated, emphasizing that monetary policy tools should have been leveraged to ensure price stability rather than political optics.
“Typically, the MPR guides short-term interest rates like the T-bill rate. So, why the glaring inconsistency between the two? I warned repeatedly that the Finance Ministry was on the wrong path, attempting to control both price and quantity in the T-bill auction market – forcing rates down from 29% to as low as 15% for 91-day bills,” he added.
He further questioned why the Bank of Ghana had not been more proactive in managing excess liquidity through open market operations (OMO) or Discount Policy Operations (DIPO).
Nevertheless, he commended the Central Bank for its latest MPC release, which includes plans to introduce a 273-day instrument to strengthen liquidity sterilization and support disinflation efforts.
“The Governor of the Central Bank is at least responding to market realities, unlike the Finance Minister, whose approach has led to this crisis,” he remarked, urging greater coordination between fiscal and monetary authorities.
Dr. Boako’s comments come in the wake of the March 21st and 28th T-bill auctions, where the government failed to meet its borrowing targets despite significantly lower interest rates.
He warned that continued divergence between fiscal and monetary policy could have dire consequences, especially as the government remains locked out of the international capital markets and lacks alternative financing sources.
“The Finance Minister must take a cue: macroeconomic management is critical to national financial stability. Without coordination, economic management suffers,” Dr. Boako stressed.
