The Bank of Ghana (BoG) set to conduct treasury bills action. However, the over-reliance on short-term financing instruments by the government has led to significant concerns in the treasury market.
In an interview, Financial Economist Professor Lord Mensah sheds light on regulatory shortcomings, investor confidence issues, and the broader economic implications of the Bank of Ghana’s (BoG) decision over the purchase of treasury bills.
“If you have a government [whose] financing sources are overly concentrated on the short-term side of the market, it is expected that sometimes there could be an abuse over regulations and then making sure that they get the funds as is required.’’
Professor Lord Mensah Finacial Economist
Prof. Mensah pointed out that the government’s actions often contradict its schedules as released by the Bank of Ghana.
“The Bank of Ghana, acting as an intermediary between investors and then government, [has often had to step in to prompt] the government to adhere to the right thing, [if not] when it happens [otherwise] that breaks down investor confidence.”
Professor Lord Mensah Finacial Economist
Such inconsistencies create uncertainties in the market and reduce investor confidence, ultimately affecting the government’s ability to secure funds efficiently.
Impact of Regulatory Lapses
Regulatory issues have further compounded the challenges in the treasury market. Prof. Mensah emphasized the interplay between law, finance, and economics.
“Where laws don’t work, obviously you seem to have regulatory problems here and there, so it can have impact or further issues when it comes to the treasury bills.”
Professor Lord Mensah Finacial Economist
He highlighted the importance of specific regulatory approvals for various categories of treasury bills. Meanwhile, generic parliamentary approval for budget financing would not suffice, as it lacks the specificity required for treasury bill issuances.
Concerns Over Parliamentary Approval Process
When questioned about the argument that parliamentary approval during the budget process eliminates the need for additional approvals, Prof. Mensah interjected;
“Getting approval for a budget deficit to be financed through treasury bills, does not necessarily dictate the specificities as to 91-day, 182-day, or one-year bills… we need the regulations of the specificities whether you are issuing this quantum’s for 91 days, it has to go through the approval of the parliament. There is a reason why it has to go through Parliament, because you are borrowing on behalf of the people [and] treasury bill is also part of borrowing.”
Professor Lord Mensah Finacial Economist
This requirement ensures transparency and accountability in the borrowing process.
The failure to follow these procedures undermines trust in government operations and raises further allegations in terms of state accountability.
Potential Market Impact of Court Interventions
Prof. Mensah also analyzed the possible consequences of court rulings on the government actions in this area.
According to Prof. Mensah, If the courts grant an application challenging the government’s practices on the issuance of treasury bills, the treasury market could face severe disruptions since it is the only source of financing available to the government at the moment.
“It will build up uncertainties on the short-term end of our market. Assurance on the market is going to go down and when it happens like that Investor confidence will [go down completely], government is really going to struggle in its operations. [And] how to even raise money to pay existing bills would be difficult. And then looking at pays salaries and all other [operations].’’
Professor Lord Mensah Finacial Economist
Such a scenario could exacerbate the government’s financial challenges and make it harder to secure funds in the future.
Call for Adherence to Proper Procedures
While acknowledging the challenges, Prof. Mensah maintained that the solution lies in adhering to the established regulatory framework.
He urged the government to obtain explicit approvals from parliament for treasury bill issuances, emphasizing the importance of transparency and investor confidence.
“The right thing must be done. Bank of Ghana should ensure the government gets approval from parliament before [they allow] the government to issue treasury bills.”
Professor Lord Mensah Finacial Economist
Prof. Lord Mensah’s analysis underscores the critical need for proper regulatory adherence in the issuance of treasury bills.
The government’s over-reliance on short-term financing, combined with lapses in regulatory compliance, has created significant risks for the treasury market and the broader economy.
Moving forward, adherence to due process and transparency will be crucial in restoring investor confidence and ensuring sustainable financial management.
