Barclays Sees Ghana Key T-Bill Yields Falling Almost a Third

Ghana’s three-month borrowing costs will drop by almost a third by the end of this year as the government narrows its budget deficit and the local currency stabilizes, said George Asante, country treasurer for Barclays Plc in the West African nation.

The benchmark 91-day Treasury-bill yield, which is used by banks as a gauge for setting lending rates, may fall to 17 percent, he said in an interview in Accra, the capital, yesterday. That would be the lowest since May, according to data compiled by Bloomberg. The notes yielded 22.76 percent at the Bank of Ghana’s last auction, held on March 8.

“In line with government’s plans to reduce the fiscal deficit this year, we expect government borrowing needs to diminish,” Asante said. “That is giving ample room to the central bank to adjust the 91-day Treasury-bill rate downwards.”

Ghana, with the second-biggest economy in West Africa, plans to reduce the budget deficit to 9 percent of gross domestic product from 12 percent last year, Finance Minister Seth Terkper said on March 5. The 2012 gap worsened, compared with a target of 6.7 percent, because of higher spending on wages, fuel subsidies and lower revenue from corporate taxes, according to Terkper.

The Bank of Ghana boosted rates on the three-month debt last year to remove excess cedis from the system and stem the currency’s decline against the dollar. The institution tried to make assets denominated in the local currency more attractive than their U.S. currency counterparts. The yields climbed 12.3 percentage points to 23 percent by the end of 2012.

Debt Sales

The cedi depreciated 16 percent against the dollar in the first half of 2012 and halted the fall in the last six months, strengthening 2 percent, according to data compiled by Bloomberg. The currency has weakened 1 percent this year and eased 0.1 percent today to 1.9225 per dollar by 12:58 p.m. in Accra.

The cedi may fall to 1.96 per dollar by the end of the year, Ridle Markus, a Johannesburg-based Africa strategist at Absa Group Ltd., said yesterday in Accra.

“The government will sell more three-year and five-year bonds this year in the total mix of treasury offers,” Alhassan Iddrisu, director of research at the Ministry of Finance and Economic Planning, said in Accra today. “We expect this to ease pressure at the short-end of the market and subsequently bring the rates down at that end.” Iddrisu said Eurobonds are also being considered to finance the 2013 budget.

Yields on Ghana’s 10-year $750 million eurobonds due October 2017 were little changed at 4.735 percent by 12:53 p.m. local time.

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