Bloomberg News

Ghana’s Yields to Fall to 3 1/2-Year Low, Central Bank Says

June 08, 2011

(Updates with analyst comment in seventh paragraph)

June 8 (Bloomberg) -- Ghana’s three-month borrowing costs are poised to drop to a 3 1/2-year low by the end of June as inflation may slow to the weakest since at least December, according to the West African nation’s central bank.

The yield on 91-day debt, used by banks as a benchmark to determine their lending rates, will decline to about 10 percent from 10.6 percent at the June 3 sale, Adams Nyinaku, the head of treasury at the Bank of Ghana, said in a telephone interview from the capital, Accra. That would be the lowest since October 2007, according to data compiled by Bloomberg. The next weekly auction takes place on June 10.

“Inflation has been coming down and we expect it to continue into June,” he said. “Looking at inflation, the 91- day treasury bill yield will go down.”

Yields on Ghana’s debt have fallen to about 11 percent from as high as 26 percent in 2009 as inflation decelerated for 18 consecutive months to 8.6 percent in December. Price growth quickened in January and February on a 30 percent increase in gasoline costs on Jan. 4, before slowing to 9 percent in April, the second month of declines. The central bank has an inflation target band of 8.5 percent, plus or minus 2 percentage points.

“Indications are that trends may probably ease into the upper limit of 8 percent by the end of the second quarter,” the Bank of Ghana said of inflation in a May 31 report on its website.

Growth Expectations

Ghana’s economy will grow 14 percent this year, up from 5.7 percent last year, with the start of oil production, the International Monetary Fund forecasts. The world’s second biggest cocoa producer began producing oil for exports from its Jubilee oil field on December 15. Current daily output at 70,000 barrels may rise to 120,000 barrels by July, according to Tullow Oil Plc, the field operator.

“Expected inflation will contribute to a reduction in the T-bill yield,” Sampson Akligoh, an economist at Accra-based Databank Financial Services Ltd. said in a telephone interview today. “I see the yield falling close to 10 percent by the end of the second quarter and to single digits by the third quarter. A favorable macroeconomic outlook will also incline the central bank to borrow cheaply for government unless public-sector borrowing increases substantially through the auction market.”

--Editors: Ana Monteiro, Linda Shen

To contact reporter on this story: Moses Dzawu in Accra at mdzawu@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.


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