Economic and financial analysts have predicted that interest rates will likely tumble by the end of the second quarter of the year, due largely to measures instituted by Government to address the country?s fiscal deficit issues.
The Central Bank?s rate setting-committee last month maintained the prime rate at 15 percent. According to the BoG, the average lending rate of banks shed a meagre 0.2 percentage points between January-December 2012 — falling from 25.9 percent to 25.7 percent. It currently hovers around 23 percent.
?In the second quarter we expect that some of the initiatives the Minister of Finance and Economic Planning has put in place to address our fiscal deficit issues will now start coming through; for example, revenue mobilisation and pertinent issues that he has talked about. So we expect the fruits of those things to come through; and once we see them coming through, it sends a signal to the market and rates should start dropping [by the end of the second quarter].
?By this I mean rates on the inter-bank market, Treasuries market and the corporate market should take that signal and start dropping,? Mr. George Asante, Country Treasurer, Barclays Bank of Ghana, told the B&FT in an Interview on the sidelines of the Barclays Africa Economic Outlook event held in Accra yesterday.
The event was aimed at sharing economic insights with key stakeholders in the financial and economic sector at global, Africa and country levels.
Finance Minister Mr. Seth Terkper has said that Government will narrow the budget gap — which widened to 12.1 percent of GDP in 2012 — to 9 percent this year and 8 percent in 2014, and target real economic growth of 8 percent.
Based on the current outlook, it is anticipated that Treasury bill interest rates will likely be between 17 and 17.5 percent by the end of the year.
?Based on current T-bill rates, by the end of the year it should be between 17 and 17.5 percent. This is not just because of government reducing expenditure, but also addressing the issue about revenue mobilisation and controlling inefficiency in government expenditure. Broadly speaking, the risk of rates going up is almost nonexistent now. It?s more about the opportunity for rates to come down,? he said.
?There is a strong investment interest in government bonds. That is why we saw the drop in interest rate at the 91day-2yr auction.?
Mr. Ridle Marcus, Africa Strategist, ABSA Bank Limited, said there is a positive outlook for increased inflows of capital and foreign direct investment into Africa. Africa is becoming more and more important as a trading destination. There is a shift in trade from the East to the West. Funds are being shifted from Europe and US into emerging markets like Ghana.
He indicated that the country?s agricultural and industrial sectors are lagging behind while the tertiary sector continues to grow. ?With the measures instituted, we expect the deficit to improve,? he said.
The Chief Executive of Barclays Africa, Mr. Kennedy G. Bungane, said the bank is looking to merge all of its African operations into one large entity under its One Africa Strategy — to create one strong and unique bank — and has applied to the Central Bank for the necessary approval.
By Dominick Andoh