As the contention between some bankers and the Finance Minister continues over the issuance of local dollar denominated bond, Economist, Dr. Eric Osei-Assibey has warned that issuing such bonds must be measured.<\/p>\n
Criticizing the Finance Minister, the Managing Director of Stanbic Bank, Alhassan Andani cautioned that the move could lure Ghanaians to convert their local currency into dollars to always participate in an issuance.<\/p>\n
Even though Mr. Terkper disagreed with the assertion, Dr. Osei-Assibey told Citi Business News<\/strong> that investors are profit driven and will switch to instruments that provide high yields in the short term, hence could move en mass to local dollar bonds.<\/p>\n \u201cIf the investor community or institutional investors see this as providing much higher returns than Treasury Bill it could in a way gradually lead to reduction in interest rates of bonds, but of course it\u2019s also likely to inject pressure on the dollar,\u201d he said.<\/p>\n He added that \u201cthe demand for dollar could go up if the relative returns on this bond is higher, then the demand for the dollar will go up because people would want to convert their currency into dollars\u201d.<\/p>\n He was however of the view that government can mitigate against any negative impact by putting the funds back into the economy.<\/p>\n \u201cThe only way that can cushion the currency from depreciation is if government put the back to the economy then off course that reduce the pressure on the dollar,\u201d he said.<\/p>\n Terkper allays fears<\/strong><\/p>\n Meanwhile the Finance Minister, Seth Terkper has rejected claims that government is competing with banks in the country for dollar currency by issuing dollar bonds locally.<\/p>\n The Managing Director of CAL Bank, Mr. Frank Adu Jnr, and the Managing Director of Stanbic Bank, Mr. Alhassan Andani \u00a0expressed some level of dissatisfaction in the new move by government to issue dollar bonds after a maiden one proved successful with government raising 94.6 million dollars.<\/p>\n \u201cI disagree with the Seth Terkper on this action. I think it is a wrong move. This is government competing directly with banks for dollars,\u201d Mr. Adu told the B&FT.<\/p>\n Mr. Andani also cautioned that the move could be counterproductive if not controlled, since Ghanaians could be lured to convert their local currency into dollars to participate in the security.<\/p>\n But \u00a0Mr. Terkper maintained that there is no justification for commercial banks to panic over the move since the policy will rather benefits the banks.<\/p>\n \u201cGovernment policy has benefited the banks, is the reverse of\u00a0 what the banks are talking about now, what they are saying here is that we are mopping dollars from their deposits and it will lead to competition by government. But you saw the reverse where government action also benefited the banks when about 500 milion dollars was used to pay domestic debt,\u201d he said.<\/p>\n He was of the view that government at the time incurred higher cost when the interest rate of the bond was at 10.75 percent, even though it is now around 10 percent.<\/p>\n \u201cAt the time, government was criticized for borrowing at 10.75 even though those bonds are now trading at below 10 percent. We did not see the banks point to the benefit,\u201d he said.<\/p>\n \u201cThe point am trying to demonstrate \u00a0is that we have been mindful of the impact of government borrowing in terms of liquidity, in terms of crowding , in terms of interest rates on the economy. If you look at that amount that we are raising which is 90 million dollars compared to the 250 million dollars in the 2014 bonds to do refinancing , we have used in excess of 500 million dollars to do domestic refinancing you will see that the balance is more in favour of banks and the domestic market in taken pressure off the domestic market than putting pressure on the domestic market,\u201d he added.<\/p>\n Reacting to the assertion that the bond could lure Ghanaians to convert their local currency into dollars, Mr. Terkper explained that the transaction was done through the Book Builders Approach with the participation of the banks.<\/p>\n He pointed out that the transaction was also limited to participants with accounts, and not done over the counter.<\/p>\n Mr. Terkper insisted that the banks cannot criticize the bond since it is also being traded on the secondary market where the banks are participants.<\/p>\n B:Lawrence Segbefia \/citibusinessnews.com\/Ghana<\/p>\n","protected":false},"excerpt":{"rendered":" As the contention between some bankers and the Finance Minister continues over the issuance of local dollar denominated bond, Economist, Dr. Eric Osei-Assibey has warned that issuing such bonds must be measured. Criticizing the Finance Minister, the Managing Director of Stanbic Bank, Alhassan Andani cautioned that the move could lure Ghanaians to convert their local […]<\/p>\n","protected":false},"author":14,"featured_media":59837,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[121,32],"tags":[2002],"yoast_head":"\n